Chapter

Developments in the International Exchange Rate and Restrictive Systems

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
August 1986
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I. Introduction

The period covered by this Report is 1985 and, for major developments, the first quarter of 1986. The Report draws on information available to the Fund from a number of sources, including that provided in the course of consultation visits to member countries, and it has been prepared in close collaboration with national authorities. The International Monetary Fund’s Articles of Agreement provide for notification by member countries to the Fund of a comprehensive description of their exchange controls and exchange rate arrangements, and changes in these as they occur. Measures intensifying members’ restrictions on imports are also monitored by the Fund in the context of its function of surveillance over exchange rate policies of members. The Report centers on exchange arrangements and exchange restrictions, but it is also more comprehensive in that it presents other external economic policy measures and intergovernmental arrangements that may have direct balance of payments implications. As in previous Reports, in the descriptions of members’ systems, questions of definition and jurisdiction have not been raised; the description in the Report of a restrictive practice by a member does not mean that it is or is not being maintained consistently with the Fund’s Articles, or that, if subject to Article VIII, it has or has not been approved by the Fund.

Global Environment

Growth of world output and trade moderated in 1985 to just under 2.8 percent following a strong recovery in 1984 that had emanated largely from the United States. Although the slowing of trade was more pronounced than that of output, the cyclical relationship between the two variables conformed to the pattern registered in 1977 and 1980, when a deceleration of activity also occurred (Chart 1). The shift in the economic performance of the industrial country group was generally favorable, as inflation rates declined in most countries, and the external current account of the group improved substantially. Inflation, as measured by the composite GNP deflator, was the lowest since 1967. Unemployment continued to be a major problem, however, not showing any decline from the peak level of 8.2 percent of the industrial country labor force reached in 1982. Trade imbalances also widened, as the deficit of the United States and the surplus of Japan rose to record levels.

Chart 1Growth of World Trade and Output, 1964–851

(Percent change in volume)

1 Trade (exports plus imports) and output (gross national product) are in volume terms. Changes for 1964–71 are annual compound percentage rates. Prior to 1977, the People’s Republic of China is excluded.

Economic performance in the group of non-oil developing countries was mixed, but overall it showed some encouraging signs. Growth in this group of countries was only slightly slower than in 1984, and the volume of exports showed a moderate gain, despite the sluggishness of markets in the industrial countries and protectionism, which continued to impede access of manufactures and agricultural products to those markets. The current account deficit of this group of countries narrowed further, and external payments arrears dropped sharply for the first time in seven years, largely as a result of improved relations with creditors that made possible the successful conclusion of rescheduling negotiations. Inflation remained at a high level in many developing countries, and the terms of trade of the group deteriorated in 1985. The reduced purchasing power of exports was particularly evident in the group of oil-exporting developing countries, resulting from a sharp decline in oil prices and the continuing sluggishness of the volume of oil exports occasioned by energy conservation and the development of alternative sources of supply in the industrial countries. GDP growth in the oil-exporting developing countries, nevertheless, was largely sustained in 1985.

Despite the easing of international interest rates, as reflected in the decline in the six-month London Interbank Offered Rate (LIBOR) from on average 11.3 percent in 1984 to 8.6 percent in 1985, and the deceleration in the growth of external debt, the debt service burden of many developing countries rose in 1985, owing to the decline in export earnings. Manufactured exports of the developing countries continued to be adversely affected by protectionism, mainly in the form of quantitative restrictions. Price support policies of the industrial countries led to oversupply of a number of agricultural commodities and exerted a depressing influence on their world prices, creating additional trade barriers for countries that export these agricultural commodities.

Exchange Rate Arrangements

A salient feature of exchange rate developments in 1985 was the weakening of the U.S. dollar, following four consecutive years of appreciation. As a result, the currencies of most of the other major industrial countries appreciated against the U.S. dollar and in nominal effective terms. The depreciation of the U.S. dollar amounted to almost 20 percent in nominal effective terms during the period March 1985 to January 1986. Over this period, short-term interest rate differentials moved substantially against U.S. dollar-denominated assets, monetary aggregates grew rapidly in the United States while they were tightened in a number of other industrial countries, and there was a slowdown of real economic growth in the United States, while on average, the rate of growth changed little in other large industrial countries.

At a meeting on September 22, 1985, finance ministers and central bank governors of the G-5 countries (France, the Federal Republic of Germany, Japan, the United Kingdom, and the United States) agreed that since the current levels did not appear to fully reflect policy commitments and changes in underlying economic conditions, a further appreciation of non-U.S. dollar currencies against the dollar would be desirable. Accordingly, the G-5 countries, in coordination with a number of the other industrial countries, intervened in foreign exchange markets toward that end. This concerted action was in contrast to the trend of recent years noted in earlier Reports toward reduced overall reliance on interventions in the foreign exchange markets but followed from intentions declared initially at the Williamsburg summit. In June 1985 the Committee of Central Bank Governors of the European Economic Community (EEC) adopted a number of measures to strengthen the workings of the European Monetary System (EMS). A realignment was undertaken in July when the Italian lira was devalued against the European Currency Unit (ECU).

Developing countries continued to use greater flexibility in the arrangements for determining their exchange rates in 1985. The trend away from single currency pegs continued, as four countries changed from U.S. dollar pegs or quasi-pegs to managed floating or to composite currency pegs. The major development among developing countries noted in the previous Report—adoption of independently market-determined floating arrangements—continued. In 1985 three developing countries (Bolivia, Dominican Republic, and Zambia) and one industrial country (New Zealand) adopted arrangements by which their exchange rates were essentially determined by market forces. As a result of these changes, the three broad groupings of exchange rate arrangements (single currency pegs, composite currency pegs, and more flexible arrangements) now apply to approximately equal proportions of the Fund membership.

In contrast to 1984, developing countries generally showed a greater willingness to adjust exchange rates to strengthen balance of payments positions. As a consequence, real exchange rates of developing countries depreciated by about 13 percent on a weighted average basis during 1985. This movement was assisted by the effective depreciation of the U.S. dollar, which remains the key reference currency or peg for many developing countries. During 1985 the average unweighted exchange rate of currencies with pegged arrangements depreciated in terms of the foreign currency to which the domestic currency was pegged by 20 percent in nominal terms, with rates of depreciation ranging from 4 percent for the Egyptian pound to 60 percent for the Laotian kip. For members with flexible arrangements, the average (unweighted) nominal depreciation amounted to 31 percent, ranging from zero for the Salvadoran colón to nearly 100 percent for the Bolivian peso. The exchange rates of several countries appreciated during 1985, although by a relatively small amount.

Commercial and Exchange Policy Developments

Protectionist pressures for trade restrictions continued unabated in 1985. Exchange restrictions were intensified significantly in a few countries in response to these pressures, but overall these actions were more than counterbalanced by liberalizing actions, particularly those affecting capital transactions. The concern that protectionist pressures might lead to widespread and retaliatory restrictive actions and weaken the international system prompted some industrial countries to adopt liberalizing measures, or at least to curb the extent of restrictive measures. Japan announced a program to remove various barriers to imports in the face of a rising current account surplus. The export restraint agreement between the United States and Japan for limiting imports of motor vehicles into the United States was not renewed in 1985, although Japan unilaterally decided to limit exports to the United States at a higher level. Recourse to retaliatory trade measures was limited in scope in 1985, but pressures for such actions grew more intense in early 1986. The United States, in retaliation for an extension of the European Communities’ (EC) preferential tariff treatment of citrus fruit imports from certain Mediterranean countries, sharply increased duties on pasta products imported from the EC. In response, the EC raised its tariffs on walnut and lemon imports from the United States.

There were few changes in the import restrictions applied by industrial countries to agricultural products, but a number of actions that were taken, mainly in the area of meat products and sugar, had restrictive effects. In the steel sector, the United States signed new bilateral agreements with the EC and Japan that provided for quantitative limits on exports of certain types of steel products to the United States. A number of new bilateral agreements involving textiles trade were concluded, and existing ones renewed; these changes were on balance in the direction of increased restrictiveness, although there was some relaxation of restrictions. Protectionist pressures were moderated by the accelerated implementation by several industrial countries of tariff cuts agreed under the Tokyo Round of Multilateral Trade Negotiations and the extension of the General Scheme of Preferences (GSP) for the developing countries.

Despite balance of payments pressures, a number of developing countries reduced the scope of import restrictions and simplified import regimes. Several of these liberalization programs were implemented in the context of exchange reforms that involved the adoption of floating exchange rate regimes. Countertrade arrangements as a means of balancing bilateral trade and of promoting and maintaining export markets continued to play an important role in the commercial policies of many countries, both industrial and developing. As in past years, it is not possible to estimate the magnitude of annual trade conducted under these arrangements, but in view of the increase in the number of new arrangements concluded during the year, their relative importance in world trade would seem to have increased.

There were very few modifications in either quantitative restrictions or licensing requirements affecting exports by the industrial countries. A large number of developing countries, however, introduced export promotion measures aimed at supporting their balance of payments. These measures included increased financial incentives, lower export taxes, and more liberal foreign exchange surrender requirements. In a number of developing as well as industrial countries, exchange guarantee and export credit facilities were introduced, with the aim of providing budgetary support for exports.

Exchange restrictions on current invisibles applicable to residents and nonresidents, mainly administered by developing countries, were on balance relaxed in 1985. A more serious form of exchange restriction on current payments, i.e., restrictions giving rise to external payments arrears, continued to be maintained by a large number of developing countries. The number of countries with payments arrears remained unchanged, but the level of total outstanding payments arrears declined substantially, as a number of countries with relatively large arrears successfully restructured the outstanding amount in the course of multilateral debt rescheduling and/or refinancing. In 1985 the total external debt obligations restructured amounted to SDR 13 billion, slightly more than one half of the total in 1984.

Reliance on multiple currency practices by the developing countries decreased in 1985, continuing the trend begun in 1984. The declining trend in 1985, however, was more significant than the change in the total number of countries maintaining such practices signifies, because a number of multiple currency practices introduced in 1985, which were operating as transitional measures, involved dual exchange market systems that led to a more realistic exchange rate for most transactions.

The trend toward liberalization of international capital transfers continued in 1985 and was evident in both industrial and developing countries. The liberalization of exchange controls in several industrial countries was undertaken in conjunction with deregulation of domestic banking, broadening of financial markets, and changes in the tax treatment of capital transactions. These developments promoted competition and increased the integration in international capital markets, as well as contributing to liberalization in the regulations governing foreign exchange transfers. A number of developing countries also introduced financial sector reforms aimed at developing financial markets through the expansion of foreign participation in the domestic market and the easing of residents’ access to foreign capital markets. Liberalization in some of these countries was facilitated by the adoption of flexible exchange rate systems, which reduced the incentives for capital flows through illegal parallel markets. Regulations on portfolio and direct investment were also liberalized in several industrial and developing countries, although liberalization to promote direct investment in developing countries proceeded at a slower pace than in 1984.

In 1985 the total Fund membership increased to 149, as one country, Tonga, joined the Fund (September 13, 1985). No new acceptances of the obligations of Article VIII, Sections 2, 3, and 4 of the Articles of Agreement were made during the year. As of end-March 1986, the number of countries that have accepted the Article VIII obligations was 60, and 89 countries were availing themselves of the transitional arrangements under Article XIV, Section 2. All members have notified the Fund of their decision regarding Article VIII or XIV status. Twenty-eight countries availing themselves of the transitional arrangements under Article XIV maintain exchange systems that are free or virtually free of restrictions on payments and transfers for current international transactions. Twelve of these countries are members of the West African Monetary Union or the Central African Monetary Area.

II. Main Developments in Exchange Arrangements and Exchange Rates

Fund members are required to notify the Fund of changes in their arrangements for determining their exchange rates, in accordance with members’ obligations under Article IV, Section 2(a), of the Articles of Agreement. Surveillance of exchange arrangements of members by the Fund, as required under Article IV, Section 3, is conducted in the context of regular consultations with members and during the intervening period between consultations, as changes in such arrangements are assessed by the staff and communicated to the Executive Board. Under the provisions of Article IV, Fund members have the right to maintain exchange arrangements of their choice; members also have certain obligations regarding the communication of these arrangements to the Fund. To facilitate the implementation of the Fund’s surveillance over exchange rate policies, members’ exchange arrangements may be classified under three broad groupings, as follows: (1) pegged arrangements, comprising currencies that are pegged either to another currency or to a currency composite, including the SDR, and currencies that display limited flexibility against another currency (quasi-pegs); (2) a middle group of managed flexibility, comprising currencies whose values are adjusted according to a set of indicators other than partner country exchange rates alone, or are maintained under a system of managed floating; and (3) “independently” floating (essentially market-determined) arrangements, including cooperative arrangements in the European Monetary System, and independently floating regimes. The basic rationale for the classification of members’ exchange arrangements is the extent and form of the flexibility that these arrangements permit, and this criterion is also applied to subcategorize each of these broad groupings in Table 1.

Table 1.Exchange Rate Arrangements as of December 31, 1985 1
Flexibility Limited vis-à-vis

a Single Currency or

Group of Currencies
More Flexible
PeggedAdjusted

according

to a set of

indicators
Single currencyCurrency compositeSingleCooperativeManagedIndependently
U.S. dollarFrench francOtherSDROthercurrency 2arrangementsfloatingfloating
Antigua andLao People’sBeninBhutanBurmaAlgeria1Afghanistan3Belgium3Brazil4ArgentinaAustralia
BarbudaDemocratic Rep.3Burkina Faso(IndianBurundiAustriaBahrain5DenmarkChile3,4CostaBolivia
The Bahamas3LiberiaCameroonrupee)Guinea3Bangladesh3Qatar5FranceColombiaRica3Canada
BarbadosLibyaCentral AfricanThe GambiaIran, IslamicBotswanaSaudi Arabia5Germany, Fed.PortugalEcuador3Dominican
BelizeNicaragua3Rep.(£ stg.)Rep. ofCape VerdeUnited ArabRep. ofSomalia3,6El Salvador3Republic
DjiboutiOmanChadJordanChina, People’sEmirates5IrelandGreeceJamaica
DominicaPanamaLesotho3Rep. ofItaly7
Comoros(SAR)Kenya8Japan
Egypt3Paraguay3CongoSwazilandRwandaCyprusLuxembourg3Guinea-Lebanon
EthiopiaPeru3Côte d’Ivoire(SAR)São Tomé andFijiNetherlandsBissauNew Zealand
GhanaSt. ChristopherEquatorialTongaPrincipeFinland8IcelandPhilippines
Grenadaand NevisGuinea(AustralianSeychellesGuyanaIndia9South
Guatemala3St. LuciaGabondollar)HungaryIndonesiaAfrica3
HaitiSierraKuwaitIsrael
St. Vincent andMaliLeone3United
Hondurasthe GrenadinesNigerVanuatuMadagascarKoreaKingdom
IraqSurinameSenegalViet NamMalawiMexico3United
Syrian Arab Rep.3TogoMalaysia8MoroccoStates
Trinidad andMaldivesNigeria3Uruguay
TobagoMaltaPakistanZaïre
Venezuela3MauritaniaSpain
Zambia
Yemen Arab Rep.MauritiusSri Lanka
Yemen, People’sMozambique3Turkey
Democratic Rep.NepalUganda
NorwayWestern
Papua NewSamoa
GuineaYugoslavia
Romania
Singapore
Solomon
Islands
Sudan3
Sweden10
Tanzania
Thailand
Tunisia
Zimbabwe

No current information is available relating to Democratic Kampuchea.

In all cases listed in this column, the U.S. dollar was the currency against which exchange rates showed limited flexibility.

Member maintains dual exchange markets involving multiple exchange arrangements. The arrangement shown is that maintained in the major market.

Member maintains a system of advance announcement of exchange rates.

The exchange rates are determined on the basis of a fixed relationship to the SDR, within margins of up to ± 7.25 percent. However, because of the maintenance of a relatively stable relationship with the U.S. dollar, these margins are not always observed.

The exchange rate is maintained within overall margins of ± 7.5 percent about the fixed shilling/SDR relationship; however, the exchange rate will be re-evaluated when indicative margins of ± 2.25 percent are exceeded.

Margins of ± 6 percent are maintained with respect to the currencies of other countries participating in the exchange rate mechanism of the European Monetary System.

The exchange rate is maintained within margins of ± 2.25 percent.

The exchange rate is maintained with margins of ± 5 percent on either side of a weighted composite of the currencies of the main trading partners.

The exchange rate is maintained within margins of ± 1.5 percent.

No current information is available relating to Democratic Kampuchea.

In all cases listed in this column, the U.S. dollar was the currency against which exchange rates showed limited flexibility.

Member maintains dual exchange markets involving multiple exchange arrangements. The arrangement shown is that maintained in the major market.

Member maintains a system of advance announcement of exchange rates.

The exchange rates are determined on the basis of a fixed relationship to the SDR, within margins of up to ± 7.25 percent. However, because of the maintenance of a relatively stable relationship with the U.S. dollar, these margins are not always observed.

The exchange rate is maintained within overall margins of ± 7.5 percent about the fixed shilling/SDR relationship; however, the exchange rate will be re-evaluated when indicative margins of ± 2.25 percent are exceeded.

Margins of ± 6 percent are maintained with respect to the currencies of other countries participating in the exchange rate mechanism of the European Monetary System.

The exchange rate is maintained within margins of ± 2.25 percent.

The exchange rate is maintained with margins of ± 5 percent on either side of a weighted composite of the currencies of the main trading partners.

The exchange rate is maintained within margins of ± 1.5 percent.

In 1985, 59 changes in exchange arrangements occurred and were communicated by members to the Fund, including measures that resulted in a reclassification of the basic type of arrangement, all discrete adjustments in exchange rates, and a number of changes in the form of composite pegs. In addition, developments in members’ effective (trade-weighted) exchange rates are also monitored continually on the basis of available data to facilitate the symmetry of treatment of pegged and flexible exchange rates; the Executive Board is notified of changes in excess of 10 percent on a “real” inflation-adjusted basis when they occur. Thirty such notifications of changes in real effective rates since the preceding consultation with the member (or previous notification) were made in 1985.1 This compares with 19 such notifications in 1984, and 6 in 1983 when the system was introduced.

Five of a total of twelve reclassifications of arrangements in 1985 were in the direction of greater flexibility. A major new development in this period was the adoption of independently floating exchange rates by developing and smaller industrial countries. Three developing countries (Bolivia, Dominican Republic, and Zambia) and one industrial country (New Zealand) introduced exchange arrangements by which their exchange rates are essentially determined by market forces. Uganda, on the other hand, ceased to maintain a freely floating system. At the end of 1985, independently floating exchange rates were therefore maintained by nine developing country members: Bolivia, Dominican Republic, Jamaica, Lebanon, Philippines, South Africa, Uruguay, Zaïre, and Zambia. In addition, four other countries adopted more flexible arrangements, moving from a peg or quasi-peg to the U.S. dollar to a currency composite peg (Maldives, Sierra Leone, and Sudan), and to a managed float (El Salvador). Only two members moved to reduced flexibility. Peru changed from adjusting the exchange rate on the basis of specific indicators to a U.S. dollar peg, and Uganda ceased floating independently and began to manage the rate. Two changes did not involve a shift in the flexibility of the arrangements. Equatorial Guinea moved from the category “Pegged: Other Single Currency” to the category “Pegged: French Franc;” and Ghana moved away from the category “Flexibility Limited vis-à-vis a Single Currency” to the category “Pegged: U.S. dollar.” In addition to these changes, a new member informed the Fund in 1985 of its exchange arrangements: Tonga has been classified within the group of countries whose currencies are pegged to a single currency (the Australian dollar). At the end of 1985, 98 (101) members had pegged or quasi-pegged exchange arrangements, 25 (26) members had managed flexibility, and the remaining 25 (20) members had arrangements under which most or all of their currency relationships were independently floating (including EMS currencies).2 (Positions as of end-1984 are shown in parentheses).

From the inception of the present classification system in December 1981 to December 1985, the proportion of Fund members with “More Flexible” arrangements and those members maintaining a cooperative arrangement under the EMS rose from 28 percent to 33 percent; those with single currency pegs and “Flexibility Limited vis-à-vis a Single Currency” arrangements declined from 47 percent to 37 percent, and those with both currency composite arrangements increased from 25 percent to 30 percent (although the use of the SDR peg declined somewhat).

Developments Affecting the Classification of Exchange Arrangements

In 1985, 12 members notified the Fund of changes in their exchange arrangements that involved a reclassification.

Eight countries instituted changes in their exchange arrangements that resulted in increased flexibility. On August 29, 1985 the Government of Bolivia announced that the previous fixed exchange rate relationship between the Bolivian peso and the U.S. dollar was replaced by a system of foreign exchange auctions to be held at least twice a week by the Central Bank of Bolivia. The official exchange rate is equivalent to the weighted average of the exchange rates resulting from actual sales of foreign exchange during the auctions. Under the new system, the official exchange rate applies to all foreign exchange operations in Bolivia. The first auction took place on September 2, 1985, and established an exchange rate of $b 1,150,000 = US$1, representing a depreciation of the Bolivian peso of 93.5 percent in terms of the U.S. dollar from the previous official selling rate of $b 75,000 = US$1. The introduction of a floating exchange rate by Bolivia was accompanied by the elimination of exchange and trade restrictions, with the exception of external payments arrears. The exchange arrangements of Bolivia were thus reclassified from the category “Pegged: U.S. Dollar” to the category “More Flexible: Independently Floating.”

The authorities of the Dominican Republic informed the Fund that with effect from January 23, 1985, the previous dual exchange markets were unified, and all foreign exchange transactions now take place at market-determined exchange rates. Exceptions are transitional arrangements for foreign exchange transactions for which the peso counterpart had already been deposited with the Central Bank, and transitional arrangements for certain other transactions that had already been authorized by the Monetary Board. The authorities also announced that the Central Bank does not intend to intervene in the foreign exchange market to influence the exchange rate. The exchange arrangements of the Dominican Republic were thus reclassified from the category “Pegged: U.S. Dollar” to the category “More Flexible: Independently Floating.”

The authorities of El Salvador informed the Fund that with effect from June 17, 1985, a number of categories of transactions have been transferred from the official to the parallel market, resulting in an effective depreciation of the colón. As a result of this change, the majority of external transactions are now conducted in the parallel market. El Salvador was thus reclassified from the category “Pegged: U.S. Dollar” to the category “More Flexible: Managed Floating.”

The authorities of Maldives notified the Fund that with effect from July 1, 1985, the Maldivian rufiyaa, which was previously maintained with limited flexibility vis-à-vis the U.S. dollar, was linked to a trade-weighted basket of currencies. Under the new system, the mid-point rufiyaa/U.S. dollar exchange rate was set initially at the previous level of Rf 7.10 = US$1, but the prescribed spread between the buying and selling rates for the U.S. dollar was increased from 0.7 percent to 1.4 percent, in terms of the buying rate. Buying and selling rates for the U.S. dollar on July 1 were Rf 7.05 = US$1 and Rf 7.15 = US$1, respectively. The exchange arrangements of Maldives were thus reclassified from the category “Flexibility Limited vis-à-vis a Single Currency” to the category “Pegged: Currency Composite.”

The New Zealand authorities informed the Fund that, with effect from March 4, 1985, the Reserve Bank of New Zealand ceased quoting buying and selling rates for the New Zealand dollar against foreign currencies, allowing the exchange rate to be determined by market forces. The Reserve Bank monitors market trends and developments, and has the option to intervene in the market to smooth out exchange rate fluctuations in periods of disturbed conditions. Prior to the adoption of the float, the New Zealand authorities had relaxed a number of exchange controls affecting capital flows late in 1984. The exchange arrangements of New Zealand were thus reclassified within the “More Flexible” category from “Managed Floating” to “Independently Floating.”

The Central Bank of Sierra Leone notified the Fund that with effect from February 21, 1985, the official exchange rate for the leone was devalued to Le 6 = US$1 from Le 2.5 = US$1, representing a 58.3 percent depreciation with respect to the U.S. dollar. At the same time, the peg for the leone was changed from the U.S. dollar to the SDR, with the Bank of Sierra Leone issuing daily equivalent exchange rates for the leone in terms of all major currencies. Since September 1984, limited allocations of foreign exchange for private sector payments had been made under an arrangement whereby a newly formed company, the Precious Minerals Marketing Company (PMMC), accepted applications for foreign exchange at buying and selling rates differing from the official rate. The effective supply price for foreign exchange to the company was close to the parallel market rate, which, in January 1985, was about Le 9 per U.S. dollar, whereas the company sold foreign exchange at exchange rates of Le 5.0 to Le 6.0 = US$1—with the PMMC recompensed by the Government for the differences between the buying and selling rates. Other channels of the foreign exchange proceeds of Sierra Leone were the required surrender of foreign exchange to the Central Bank for official uses (including payments for imports of oil and debt servicing), a very small amount of surrender to commercial banks, retention allowances for own use by certain exporters, and an extensive parallel market. The exchange arrangements of Sierra Leone were thus reclassified from the category “Pegged: U.S. Dollar” to the category “Pegged: Currency Composite.”

The authorities of Sudan informed the Fund that with effect from August 19, 1985, the official exchange rate for the Sudanese pound was pegged to a composite of major currencies, terminating a fixed relationship with the U.S. dollar. The official exchange rate declared by the Bank of Sudan on August 19 was LSd 2.475 = US$1. Thereafter, the Bank of Sudan announced a revised U.S. dollar/ Sudanese pound rate on a weekly basis, while cross rates for other major currencies were announced on a daily basis, as was the previous practice. The exchange arrangements of Sudan were thus reclassified from the category “Pegged: U.S. Dollar” to the category “Pegged: Currency Composite.” The basket pegging arrangement was, in practice, discontinued in September and replaced by a system of discretionary adjustments; however, the rate had remained unchanged at LSd 2.504 = US$1 since September 23.

Zambia notified the Fund that, with effect from October 4, 1985, the exchange rate of the kwacha is being determined by a weekly foreign exchange auction, under which all exchange transactions are to take place, and the system of determining the kwacha rate on the basis of a basket of currencies had been discontinued. The auction-determined rate applies to all foreign exchange transactions, although as a transitional arrangement expatriate remittances were effected at the pre-auction rate of K 2.2 per U.S. dollar during the period October 4 to December 31, 1985. The first rate under the new exchange rate system announced on October 11, 1985 was K 5.01 = US$1, representing a depreciation of 56.1 percent in terms of the U.S. dollar. In the interim, the authorities suspended dealings in foreign exchange between the Bank of Zambia and Zambian-based authorized dealers. Zambia was thus reclassified from the category “Pegged: Currency Composite” to the category “More Flexible: Independently Floating.”

Two countries instituted changes in their exchange arrangements resulting in no change in the degree of flexibility.

In Equatorial Guinea, the ekwele was withdrawn from circulation on January 1, 1985, and was replaced by the CFA franc issued by the Bank of Central African States, at the rate of Bipk. 4 for one CFA franc. The CFA franc is in turn pegged to the French franc at the fixed rate of CFAF 1 = F0.02. The exchange arrangements of Equatorial Guinea were thus reclassified from the category “Pegged: Other Currency” to the category “Pegged: French franc.”

The authorities of Ghana informed the Fund that, with effect from April 19, 1985, the exchange rate of the cedi was adjusted from Ȼ 50 = US$1 to Ȼ 53 = US$1, representing a 5.7 percent devaluation against the U.S. dollar. The authorities indicated their intention to continue to adjust the exchange rate against the U.S. dollar periodically during 1985. The exchange arrangements of Ghana were therefore reclassified from the category “Limited Flexibility vis-à-vis a Single Currency” to the category “Pegged: U.S. Dollar.”

Two countries instituted changes in their exchange arrangements, which resulted in reduced flexibility.

Peru informed the Fund that, with effect from August 1, 1985, the Peruvian authorities depreciated the sol and fixed the exchange rate in terms of the U.S. dollar. On that date, the exchange rate of the sol in the primary market was changed from S/. 12,449.05 = US$1 to S/. 13,942.77 = US$1 on a mid-point basis, representing a depreciation of 10.7 percent in terms of the U.S. dollar. Also with effect from August 1, 1985, the convertibility into foreign currency of all U.S. dollar-denominated deposits with Peruvian banks was suspended for a period of 90 days; the bulk of these deposits, which accounted for some three fifths of the banking system’s liabilities to the private sector, consisted of negotiable certificates of deposit; before August 1, 1985, there had been an active market for these certificates of deposit (the certificates market), in which U.S. dollars could be acquired freely at market-determined premiums. During the suspension period, which was subsequently extended through April 30, 1986, holders of U.S. dollar-denominated deposits were permitted to convert them into soles at an exchange rate equivalent to that prevailing in the primary market plus a premium of 3 percent to use them and to make any payments abroad authorized to be made through the primary market, or to use them at their maturity to open new U.S. dollar certificates of deposit. Trading of these certificates between private parties was not restricted, nor was the suspension of convertibility applicable to diplomatic missions, international organizations, or their staffs. A free market was also established temporarily to handle transactions not eligible for foreign exchange from the primary market, essentially capital transactions and current invisible payments, and which heretofore had been channeled through the certificates market. On August 9, 1985 the Central Reserve Bank of Peru announced that it had decided to buy foreign exchange purchased by financial institutions in the free exchange market at S/. 17,500 = US$1. The exchange arrangements of Peru were thus reclassified from the category “More Flexible: Adjusted According to a Set of Indicators” to the category “Pegged: U.S. Dollar.”

Following the unification of the exchange rate system in June 1984, all foreign exchange transactions in Uganda have been taking place at an exchange rate determined in the weekly auctions held by the Bank of Uganda. Between November 1984 and September 1985, the rate remained unchanged because of administrative actions. Since then, although there has been some movement, the rates have not reflected underlying market conditions, owing to official restrictions on the bidding process. As a result, the exchange arrangements of Uganda have been reclassified from the category “More Flexible: Independently Floating” to the category “More Flexible: Managed Floating.”

After becoming a member of the Fund on September 13, 1985, the authorities of Tonga communicated to the Fund that the currency of Tonga is the pa’anga, which is pegged to the Australian dollar, the intervention currency, at T$1 = A$1. Tonga was thus classified with the group of countries whose currencies are pegged to a single currency other than the U.S. dollar.

Developments in Exchange Rates of Industrial Countries

An adjustment of central rates within the European Monetary System was implemented on July 22, 1985. The central rates of the Irish pound, the French franc, the Danish krone, the Netherlands guilder, the deutsche mark, the Belgian franc, and the Luxembourg franc were raised by 2 percent, while that of the Italian lira was lowered by 6 percent. These changes involved a depreciation of 7.8 percent in the bilateral central rates of the Italian lira in terms of each of the other EMS currencies (a depreciation of 8.5 percent expressed as lira per foreign currency unit). All other bilateral central rates remained unchanged from the previous alignment. The new rates in terms of the ECU—which includes the pound sterling and the Greek drachma along with the currencies participating in the EMS exchange rate mechanism—are calculated taking into account notional central rates for the pound sterling and the Greek drachma; these were set on the basis of market levels for these currencies on July 19. Given the relatively large weight of the pound sterling in the ECU basket, the central rates of the currencies in the exchange rate mechanism of the EMS, other than the Italian lira, appreciated by only 0.2 percent in terms of the ECU, while the central rate of the Italian lira depreciated by 7.7 percent in terms of the ECU. The central rate against the ECU was set at Lit 1,520.60.

The U.S. dollar continued to appreciate through to a peak in February 1985, and then depreciated by some 7 percent before leveling off in July and August. On September 22 the G-5 countries (France, Federal Republic of Germany, Japan, United Kingdom, and United States) declared, inter alia, that exchange rates should better reflect fundamental economic conditions and that further measures aimed at opening up markets would be important in resisting protectionism. The G-5 agreed that some further orderly appreciation of the main nondollar currencies against the U.S. dollar would be desirable and expressed their readiness to cooperate more closely to encourage such a development when to do so would be helpful. Immediately following this announcement, the exchange value of the U.S. dollar fell by 5.8 percent in effective multilateral exchange rate model (MERM) terms. After the sharp drop in the value of the U.S. dollar in the week following the announcement of September 22, the U.S. dollar generally continued to depreciate, albeit at a more moderate pace. Throughout 1985 only two of the industrial countries’ currencies depreciated against the U.S. dollar: the Australian dollar (17.7 percent), and the Canadian dollar (5.4 percent) (Table 2).3 The Netherlands guilder had the largest appreciation against the U.S. dollar in 1985 (28 percent on an end-year basis), while the New Zealand dollar had the smallest appreciation (4.4 percent).

Table 2.Exchange Rate Movements of Currencies of Industrial Countries with “Cooperative” or “Independently Floating” Arrangements(December 31, 1984-December 31, 1985)
Exchange Rate

Currency Units
MERMPercentage

Appreciation ( + )/

Depreciation ( —)
per U.S. dollar

(End of Period)
Index

(1980 = 100)
In terms

of U.S. dollar
MERM
AustraliaDec. 31, 19841.208099.5
(dollar)Dec. 31, 19851.468673.8−17.7−25.8
Belgium/LuxembourgDec. 31, 198463.0877.4
(franc)Dec. 31, 198550.3680.89+ 25.3+ 4.5
CanadaDec. 31, 19841.3214107.0
(dollar)Dec. 31, 19851.397596.19−5.4−10.1
DenmarkDec. 31, 198411.2678.1
(krone)Dec. 31, 19858.9785.0+ 25.5+ 8.8
FranceDec. 31, 19849.59268.0
(franc)Dec. 31, 19857.56174.15+ 26.9+ 9.0
Germany, Fed. Rep. ofDec. 31, 19843.14893.5
(deutsche mark)Dec. 31, 19852.461100.84+ 27.9+ 7.9
IrelandDec. 31, 19841.008674.2
(pound)Dec. 31, 1985.804281.85+ 25.4+ 10.3
ItalyDec. 31, 19841,935.8869.4
(lira)Dec. 31, 19851,678.566.71+ 15.3−3.9
JapanDec. 31, 1984251.1123.7
(yen)Dec. 31, 1985200.5140.15+ 25.2+ 13.3
NetherlandsDec. 31, 19843.549592.3
(guilder)Dec. 31, 19852.772100.43+ 28.0+ 8.8
New ZealandDec. 31, 19842.0938773.201
(dollar)Dec. 31, 19852.006077.05+ 4.4+ 5.3
United KingdomDec. 31, 19840.864777.0
(sterling)Dec. 31, 1985.692382.47+ 24.9+ 7.1
United StatesDec. 31, 1984152.8
(dollar)Dec. 31, 1985135.6−11.3
Source: International Monetary Fund, International Financial Statistics.

Nominal effective exchange rate.

Source: International Monetary Fund, International Financial Statistics.

Nominal effective exchange rate.

As in 1984, there were sizable movements in the nominal effective exchange rates of the currencies of most industrial countries in 1985. In effective (MERM) end-of-year terms, the largest exchange rate appreciation was that of the Japanese yen (13.3 percent). Other appreciations ranged from 10.3 percent (Ireland) to 4.5 percent (Belgium/Luxembourg), while the currencies of the following four countries depreciated: Australia (25.8 percent), Canada (10.1 percent), Italy (3.9 percent), and the United States (11.3 percent).

Other Developments in Exchange Rate Arrangements

Other changes in exchange arrangements communicated to the Fund4 included discrete exchange rate changes in terms of the peg or intervention currency (25 changes), changes in the composition of currency baskets (2 changes), and changes in fluctuation bands (2 changes). Of the discrete adjustments to exchange rates, all represented depreciations with respect to the peg or intervention currency (Table 3). Among those members whose currencies were pegged to the U.S. dollar, seven countries implemented changes in their exchange arrangements or in their exchange rates during the period under review.

Table 3.Changes in Exchange Rates of Currencies Pegged to Single Currency or Currency Composites, 1985
Percentage
Domestic CurrencyAppreciation ( + )/
Units per U.S.Depreciation ( – ),
Dollar or(in Terms of
Date ofper SDR1U.S. Dollar, SDR,
Country (Currency)ChangePegOld rateNew rateor Currency Composite)1
Bangladesh (taka)February 122Other composite26.0031.00−16.13
Bolivia (peso)February 11U.S. dollar8,571.0045,000.00−81.50
May 16U.S. dollar45,000.0067,000.00−32.84
Botswana (pula)January 9Other composite−15.00
Egypt (pound)3January 5U.S. dollar1.201.25−4.00
Ghana (cedi)August 12U.S. dollar53.0057.00−7.00
October 7U.S. dollar57.0060.00−5.00
Kenya (shilling)March 29SDR15.1915.90−4.50
April 30SDR15.9015.98−0.50
June 28SDR15.9816.15−1.05
August 16SDR16.1517.74−9.00
Lao, People’s Democratic
Rep. (kip)4JulyU.S. dollar108.00270.00−60.00
Madagascar (franc)5January 2Other composite−3.30
March 5Other composite−2.40
March 20Other composite−2.30
July 8Other composite−2.00
October 18Other composite−0.30
November 11Other composite−1.70
November 18Other composite−1.10
December 12Other composite−1.50
December 246Other composite−1.30
Malawi (kwacha)7April 1Other composite1.541.80−14.50
Mauritania (ouguiya)7February 15Other composite67.1580.00−16.10
Nepal (rupee)7November 30Other composite17.5020.50−14.60
Sudan (pound)7,8February 12Other composite1.302.50−48.00
Trinidad and Tobago
(dollar)9December 18U.S. dollar2.403.60−33.30
Vanuatu (vatu)April 1SDR100.60110.00−8.50
Viet Nam (dong)10September 14SDR12.0615.00−19.60
Yemen Arab Rep. (rial)5February 11U.S. dollar5.866.49−9.60

The currency units and magnitude of devaluations are expressed in terms of the currency peg.

The rate was adjusted on 14 occasions since this date; the old rate refers to the midpoint rate before February 12, and the new rate to the midpoint rate as of December 22.

Rate applicable to purchases and sales of foreign exchange for a large portion of private sector transactions that previously took place at rates freely negotiated between private nonbank entities.

Rate applicable to private inward remittances.

Midpoint rates.

The cumulative depreciation of the Malagasy franc in 1985 was 15.9 percent.

Devaluation against the U.S. dollar, the intervention currency.

Rate is that of the official market. The free (commercial bank) rate was initially set as US$1 = LSd 3.00, compared to the previous commercial bank rate of US$1 = LSd 2.10 and a free market rate averaging US$1 = LSd 3.6 in January 1985. The rate had depreciated to US$1 = LSd 3.48 as of March 31, 1985.

Rate applies to all transactions except imports of essential food items, drugs, certain agricultural imports, and school books.

The new dong, with a value equal to 10 percent of the old dong, was issued by the State Bank on the same date.

The currency units and magnitude of devaluations are expressed in terms of the currency peg.

The rate was adjusted on 14 occasions since this date; the old rate refers to the midpoint rate before February 12, and the new rate to the midpoint rate as of December 22.

Rate applicable to purchases and sales of foreign exchange for a large portion of private sector transactions that previously took place at rates freely negotiated between private nonbank entities.

Rate applicable to private inward remittances.

Midpoint rates.

The cumulative depreciation of the Malagasy franc in 1985 was 15.9 percent.

Devaluation against the U.S. dollar, the intervention currency.

Rate is that of the official market. The free (commercial bank) rate was initially set as US$1 = LSd 3.00, compared to the previous commercial bank rate of US$1 = LSd 2.10 and a free market rate averaging US$1 = LSd 3.6 in January 1985. The rate had depreciated to US$1 = LSd 3.48 as of March 31, 1985.

Rate applies to all transactions except imports of essential food items, drugs, certain agricultural imports, and school books.

The new dong, with a value equal to 10 percent of the old dong, was issued by the State Bank on the same date.

The authorities of Egypt informed the Fund that measures were taken with effect from January 5, 1985, aimed mainly at merging the free market into the fixed rate commercial bank pool; purchases and sales of foreign exchange for a large portion of private sector transactions that previously took place at rates freely negotiated between private nonbank entities were now required to be effected by the authorized banks at a premium exchange rate set by a newly instituted committee. The free market is now accessible only for invisible transactions by the private sector and, on a transitional basis, for private imports utilizing own exchange. The committee meets daily for the purpose of deciding, on the basis of market conditions and economic policies, the value of the premium to be applied to the official commercial bank pool exchange rate of LE 0.83168 = US$1 (buying). On the first day of operation of the new system, the premium was set at 49.7 percent in local currency terms, resulting in a premium buying rate of LE 1.245 = US$1. This compared with a premium buying rate in effect on the previous day of LE 1.20 = US$1, and a free market rate of about LE 1.35 = US$1. Accompanying changes in the utilization of foreign exchange by exporters and the prohibition of the use of free accounts by private importers resulted in an appreciation of the exchange rate for private traders. Despite the adjustment of the premium rate, the measures are estimated to have led on average to a further small appreciation of the overall effective exchange rate of the Egyptian pound.

With effect from August 12, the Ghanaian cedi was devalued by 7.0 percent in terms of the U.S. dollar, from Ȼ 53 = US$1 to Ȼ 57 = US$1. A further adjustment from Ȼ 57 = US$1 to Ȼ 60 = US$1, with effect from October 7, brought the cumulative devaluation since the end of 1984 to 16.7 percent.

In July the authorities of the Lao People’s Democratic Republic introduced a new rate of KN 300 = US$1 for purchases of foreign exchange by authorized trading companies, while the special exchange rate applicable to private inward remittances was changed from KN 108 = US$1 to KN 270 = US$1.

The authorities of Nicaragua informed the Fund that a new exchange system, which incorporates a reduction in the number of multiple exchange rates and has resulted in an effective devaluation of the Nicaraguan córdoba, was introduced with effect from February 8, 1985. Under the former exchange system in effect at the end of 1984, the official exchange market comprised three basic exchange rates ranging from C$10 to C$28 per US$1, and there were also a number of mixing rates and an exchange tax. The new exchange system involves the following rates: (1) an exchange rate of C$10 per US$1 applies to interest and principal payments on external loans disbursed up to February 8, 1985; (2) an exchange rate of C$20 per US$1 applies to the provisions of foreign exchange for imports of raw materials, spare parts, and certain essential consumer goods; (3) an exchange rate of C$28 per US$1 applies to imports of petroleum products and certain nonessential consumer goods, to all export proceeds, and to receipts from freight, insurance, port services, investment income, and expenditures by foreign embassies; (4) an exchange rate of C$40 per US$1 applies for imports of many capital goods; (5) an exchange rate of C$50 per US$1 applies to payments for business and official travel, educational expenses abroad, medical expenses abroad, and certain invisible transactions, and to exports of printed materials, international communication services, and foreign grants; and (6) a legal free exchange market determines the rates that apply to tourism, private remittances, and other invisibles not subject to the fixed exchange rates. (This exchange market began operation in May.)

The Central Bank of Paraguay advised the Fund that, with effect from February 18, 1985, the former exchange rate system, whereby Paraguay had three basic exchange rates, has been changed to a system involving four basic rates. The system of minimum export prices denominated in U.S. dollars (aforos) was also reintroduced as the basis of surrender and conversion of all export proceeds. The four basic rates are: (1) ₲ 160 per US$1 for public sector capital and external debt service payments; (2) ₲ 240 per US$1 for 50 percent of receipts from exports valued at minimum prices, for registered private capital transactions, for imports of petroleum and agricultural and industrial inputs, and for the transactions of the binational entities; (3) ₲ 400 per US$1 for the remaining 50 percent of export proceeds based on minimum export prices; and (4) a free market exchange rate for all other imports, profit remittances, and service payments.

The authorities of Trinidad and Tobago notified the Fund that, with effect from December 18, the exchange rate of the Trinidad and Tobago dollar was adjusted from TT$2.40 = US$1 to TT$3.60 = US$1 for most transactions. The previous exchange rate continues to apply to imports of essential food items, drugs, certain agricultural imports, and school books. Since imports eligible for the TT$2.40 per U.S. dollar exchange rate are estimated to account for less than one fourth of total imports, the average depreciation of the Trinidad and Tobago dollar was about 30 percent for merchandise transactions.

The Yemen Arab Republic changed the midpoint exchange rate of the Yemeni rial against the U.S. dollar on February 11, from YR1s 5.86 = US$1 to YR1s 6.4850 = US$1, representing a 9.6 percent depreciation.

Among those members with currencies pegged to a currency other than the U.S. dollar or the French franc, Lesotho implemented a change in its exchange arrangement. In conjunction with the measures taken by South Africa, the authorities of Lesotho reintroduced the dual exchange rate (“financial rand”) system that had been discontinued in February 1983. The Central Bank of Lesotho noted that the loti continues to be equal in value to the South African rand. Lesotho forms part of the Rand Monetary Area.

Among those members whose currencies are pegged to the SDR, four countries implemented changes in their exchange rates or exchange arrangements.

In Guinea the rate of GS 36 = FF1 was set for sales to the banking system of foreign exchange originating from specified operations, effective October 7. In the official foreign exchange market the syli is pegged to the SDR at the rate of GS 24.6853 = SDR 1; on the basis of this relationship, the value of the syli in the official market vis-à-vis the French franc on October 7 was GS 2.879 = FF 1. Specified operations conducted through the newly created secondary market include export receipts other than those originating from mining exports, capital inflows for investment and transfers from abroad (including grants), and expenditures for tourist and business travel purposes. The creation of the new market is intended to be part of a process aimed at bringing the Guinean exchange rate to a more realistic level.

Kenya adjusted the exchange rate of the shilling against the SDR on March 29, from a rate of K Sh 15.187159 = SDR 1 to K Sh 15.896735 on April 30, to K Sh 15.976 = SDR 1 on June 28, to K Sh 16.148906 = SDR 1, and again on August 16 to K Sh 17.737761 = SDR 1, representing a gradual cumulative depreciation of 15.1 percent against the SDR since the March 29 modification.

With effect from April 1, Vanuatu devalued the vatu by 8.5 percent against the SDR, to which it is pegged. The new midpoint rate of the vatu is VT 110.00 = SDR 1, compared with the previous rate of VT 100.60 = SDR 1.

The State Bank of Viet Nam has been authorized, with effect from September 14, to issue new dong and to withdraw old dong from circulation. The new dong has a value equal to ten of the old dong. In addition, with effect from September 15, the exchange rate of the new dong against the U.S. dollar has been adjusted to D 15 = US$1; the official exchange rate of the old dong was D 12.06 = US$1.

Among those members with currencies “Pegged to a Currency Composite other than the SDR,” ten countries implemented changes in their exchange rates or exchange arrangements during 1985.

Botswana devalued the pula, which is pegged to a basket composed of SDRs and South African rand, by approximately 15 percent with effect from the close of business on January 9. At the same time, the weight of the rand in the pula basket was increased from 50 to 75 percent. On January 20, 1986 the weight of the rand in the basket was reduced from 75 to 65 percent, and that of the SDR was correspondingly raised to 35 percent; but the exchange rate of the pula remained virtually unchanged on that date.

On January 1 the People’s Republic of China discontinued the use of the internal settlement rate, which had been used for all foreign trade and related transactions. Consequently, the official exchange rate for the renminbi now applies to all foreign exchange transactions. The internal settlement rate was Y 2.8 = US$1 until January 1, and on January 2 the representative rate for the renminbi communicated to the Fund was Y 2.8097 = US$1.

With effect from January 3, 1985, the National Bank of Hungary has been quoting the official exchange rates of foreign currencies five times per week, as against the previous once a week, except rates for notes and checks.

Madagascar devalued the franc on a number of occasions in 1985, for a cumulative movement of 15.9 percent against the currency composite to which it is pegged.

Malawi devalued the kwacha on April 1 by 15 percent against the currency composite to which it is pegged. Measured against the U.S. dollar, the intervention currency, the rate was adjusted from MK 1.5359 = US$1 at the end of March to MK 1.7963 = US$1 on April 2, representing a 14.5 percent devaluation.

With effect from December 2, the Maltese monetary authorities adjusted the Maltese lira formula by reincluding the Italian lira and the Belgian franc in the currency basket. The new weights were derived on the basis of the average merchandise trade flows and transit-related foreign exchange earnings during the three years to mid-1985. Future movements in the Maltese lira rate will thus reflect more closely the behavior in the international foreign exchange market of the currencies of Malta’s major trading partners.

Mauritania adjusted the exchange rate of the ouguiya on February 15, from UM 67.15 = US$1 to UM 80 = US$1, representing a 16 percent devaluation in terms of the U.S. dollar. In addition, all broken cross-rates were eliminated.

Nepal changed the mid-point exchange rate of the rupee on November 30, from NRs 17.50 per U.S. dollar to NRs 20.50 per U.S. dollar, representing a devaluation of 14.6 percent. The new official buying and selling rates are NRs 20.40 per U.S. dollar and NRs 20.60 per U.S. dollar, respectively.

The three-tier exchange market system of Sudan was replaced on February 12 by a dual exchange rate system to be operated exclusively by the central bank and the commercial banks (to the exclusion of previously licensed private dealers). The official exchange rate for the Sudanese pound was set at US$1 = LSd 2.50; this rate represented a 48 percent depreciation from the previous rate of US$1 = LSd 1.30. Transactions in this market were enlarged to include certain export proceeds and imports previously channeled through the commercial bank market. The commercial bank rate was initially set at US$1 = LSd 3.00 (compared to the previous commercial bank rate of US$1 = LSd 2.10 and a free market averaging US$1 = LSd 3.6 in January 1985). On March 23 a circular was issued by the Bank of Sudan permitting commercial banks to set independently their own buying and selling rates for foreign currencies.

Sweden announced that, with effect from June 27, it would narrow the margin within which the foreign currency index is permitted to fluctuate and publish the margin. Fluctuations are limited up to a maximum of 1.5 percent in comparison to the earlier margin of 2.25 percent. The index will then be permitted to move between a minimum of 130 and a maximum of 134 around the benchmark set at 132.

Changes in exchange rates or exchange arrangements in 1985 of currencies subject to the category “More Flexible Arrangements” are shown in Table 4. Among the countries with exchange arrangements classified as “More Flexible,” three countries adjusted their exchange rates “According to a Set of Indicators.”

Table 4.Changes in Exchange Rates of Currencies Subject to “More Flexible” Arrangements1(December 31, 1984-December 31, 1985)
Percentage Appreciation ( + )/
Currency Units per U.S. Dollar2,3Depreciation ( – ) (in
(End of Period)Terms of U.S. Dollars
Dec. 31, 1984Dec. 31, 1985per Currency Unit)
Argentina (austral).1787.8005−77.7
Bolivia (peso)8,571.01,692,000.0−99.5
Brazil (cruzeiro)3,184.010,490.0−69.6
Chile (peso)127.80180.22−29.1
Colombia (peso)113.89172.2−33.9
Costa Rica (colón)47.7553.7−11.1
Dominican Republic (peso)1.02.94−66.0
Ecuador (sucre)67.17595.75−29.8
El Salvador (colón)2.52.5
Greece (drachma)128.48147.76−13.0
Guinea-Bissau (peso)128.576173.607−25.9
Iceland (krona)40.54542.06−3.6
India (rupee)12.451412.1655+ 2.4
Indonesia (rupiah)1,074.01,125.0−4.5
Israel (new sheqel).63871.4995−57.4
Jamaica (dollar)4.935.49−10.0
Korea (won)827.4890.2−7.1
Lebanon (pound)8.8918.1−50.9
Mexico (peso)192.56371.7−48.2
Morocco (dirham)9.55129.6213−0.7
New Zealand (dollar)2.09382.0060+ 4.4
Nigeria (naira)0.80830.9996−19.1
Pakistan (rupee)15.3615.98−3.9
Philippines (peso)19.7619.032+ 3.8
Portugal (escudo)169.28157.487+ 7.5
Somalia (shilling)26.042.5−38.8
South Africa (rand)1.98492.5575−22.4
Spain (peseta)173.4154.15+ 12.5
Sri Lanka (rupee)26.2827.408−4.1
Turkey (lira)444.735576.855−22.9
Uganda (shilling)520.01,400.0−62.9
Uruguay (new peso)74.25125.0−40.6
Western Samoa (tala)2.18292.3063−5.3
Yugoslavia (dinar)211.749312.805−32.3
Zaïre (zaïre)40.4555.7925−27.5
Zambia (kwacha)2.20085.70−61.4

The information presented in this table relates to those members not included in Table 3 whose arrangements are classified in the category “More Flexible” as of December 31, 1985. Exchange rates shown are midpoints of buying and selling rates.

For those countries that maintain multiple rates, the rate shown is either that quoted by the authorities as the official rate or that used most widely in the country’s international transactions.

Argentina and Israel introduced new currencies in 1985. In each case, one unit of the new currency has a value equal to 1,000 units of the old currency.

The information presented in this table relates to those members not included in Table 3 whose arrangements are classified in the category “More Flexible” as of December 31, 1985. Exchange rates shown are midpoints of buying and selling rates.

For those countries that maintain multiple rates, the rate shown is either that quoted by the authorities as the official rate or that used most widely in the country’s international transactions.

Argentina and Israel introduced new currencies in 1985. In each case, one unit of the new currency has a value equal to 1,000 units of the old currency.

Chile devalued the exchange rate of the peso vis-à-vis the U.S. dollar by 8.3 percent on February 27 from Ch$132.17 = US$1 to Ch$144.07 = US$1. On June 29 the peso was devalued by 14.7 percent against the U.S. dollar to Ch$168.9 = US$1. Also with effect from that date, it was announced that the peso would be adjusted on a daily basis through August 1985 at a rate equal to 1.7 percent per month, after which the former practice of adjusting the rate daily on the basis of the previous month’s rate of inflation less an estimate of international inflation would be resumed. The authorities also announced that the intervention points of the Central Bank were raised from 0.5 percent on either side of the daily rate to 2 percent.

Portugal implemented changes in the operation of the foreign exchange market allowing commercial banks to satisfy their foreign exchange requirements among themselves. Under the old system, the foreign exchange needs of commercial banks, as represented by their balance sheets, were settled at noon of each day at a determined exchange rate. In contrast, under the new system exchange rates are not set solely by the Bank of Portugal; rather, the Bank of Portugal informs the commercial banks of the official (intervention) exchange rate on a daily basis. In addition, the commercial banks are free to set exchange rates based on demand and supply. The right of the commercial banks to operate in the interbank foreign exchange market is limited to banks domiciled in Portugal, whether foreign or domestic.

With effect from January 1, the official exchange rate of the Somali shilling was devalued by 28 percent in foreign currency terms, from So. Sh. 26 per US$1 to So. Sh. 36 per US$1. During the first eight months of 1985, adjustment of the official rate continued in accordance with the system of pegging to the real SDR. On November 2 the exchange rate was adjusted from So. Sh. 40.6083 per U.S. dollar to So. Sh. 42.5 per U.S. dollar, representing a devaluation of 4.5 percent.

Six countries classified as “Managed Floating” adjusted their exchange rates in discrete fashion on occasions during 1985.

With effect from June 14, Argentina introduced a new monetary unit, the “austral” (₳), to replace the peso argentino ($a) as the currency of Argentina. The austral has a value equal to 1,000 pesos. Between June 14 and December 31, 1985, the value of the austral was maintained at ₳ 0.80 = US$1.

Ecuador formally completed the unification of the exchange markets for current international transactions on November 12, by moving the official buying rate to S/. 95.00 per U.S. dollar from S/. 66.50 per U.S. dollar, which had been the exchange rate in the intervention market since September 4, 1985. Ecuador continues to maintain a free market for international capital transactions, in which the exchange rate is determined by market forces. With this action, all transitional provisions to sell foreign exchange at a rate different from the new unified rate have ended, except for the transfer of surpluses generated by foreign oil companies during the period April–August 1985. These surpluses may be repatriated at the rate of S/. 67.85 per U.S. dollar, irrespective of the official rate that might prevail at the time the transfer takes place.

Greece devalued the drachma on October 11 by 15 percent.

Israel devalued the sheqel by 15.8 percent on July 1; on that date, the representative rate was IS 1,500.00 = US$1, as against IS 1,262.40 = US$1 on June 28. In addition, with effect from September 4, the Israeli authorities introduced a new currency unit called the “new sheqel” (plural, sheqalim) with a value equal to 1,000 of the former sheqel. The old and new currencies will be legal tender concurrently for a year following introduction of the new unit, and for a further year it will be possible to convert freely the old sheqel into the new sheqel.

New rules regarding the operation of foreign exchange establishments (casas de cambio) were introduced in Mexico on June 5. The parallel exchange market was officially recognized and Mexican banks have been permitted to participate in the free exchange market through their affiliated foreign exchange establishments. On July 11 Mexico abolished the so-called “free” exchange market, which was officially set and managed by the commercial banks and covered transactions not authorized through the controlled market (access to this market had been subject to limitations from time to time). Hence, under the new regime announced July 11, purchases and sales of foreign exchange for transactions other than those conducted at the controlled market rate took place at the parallel market rate. On July 25 the Mexican authorities announced a 17 percent devaluation of the controlled market, moving the mid-point rate from Mex$232.8 to Mex$279.7 = US$1. On August 5 a new system of managed floating for the controlled market came into effect. Under this system, the “window” exchange rate is to be adjusted daily in unspecified and not necessarily equal amounts. The size of the adjustment is based, inter alia, on the following factors: (1) the demand for and supply of foreign exchange in the controlled market; (2) the objective of obtaining adequate levels of international reserves; (3) the movements of domestic and foreign prices; and (4) movements in other exchange rate relationships. Transactions in the controlled market can be completed at a retail rate, agreed between these parties and the financial institutions authorized to operate in this market, or at the “equilibrium exchange rate” of the day. The latter is determined for the controlled market each day at a fixing session at the Bank of Mexico, where representatives of the various financial institutions operating in this market exchange bids for purchases and sales of foreign exchange; the Bank of Mexico may also submit bids in these sessions. Eventually, the “window” rate would be the equilibrium rate reflecting demand and supply in the controlled market, and the sessions of the Bank of Mexico would be a fixing session to determine a reference rate. As of end-1985, the average “free” exchange rate was Mex$447.5 and the rate in the controlled market was Mex$371.50.

Western Samoa discontinued the fixed link between the tala and the New Zealand dollar on March 1. With effect from that date, the exchange rate is determined with reference to a weighted basket of currencies, with account taken also of other factors considered to be important by the authorities. At the same time, the U.S. dollar replaced the New Zealand dollar as the intervention currency. The mid-point exchange rate of the tala changed from WS$2.338 = US$1 on February 28 to WS$2.342 = US$1 on March 1, representing an 0.2 percent depreciation of the tala in terms of the U.S. dollar.

Two countries classified as “Independently Floating” implemented changes in their exchange arrangements.

Bolivia depreciated the peso from $b 8,571 to $b 45,000 per US$1 for foreign exchange purchases in the official exchange market by the Central Bank and commercial banks, with effect from February 11, 1985. At the same time, the Central Bank began to apply new selling rates of $b 49,550 to commercial banks and $b 50,000 to the general public, compared with the previous rates of $b 8,995 and $b 9,000 per US$1. On a midpoint basis, this action represented an 81.5 percent depreciation of the Bolivian peso for transactions with the general public. With effect from May 16, the Central Bank’s buying rate for the Bolivian peso was further depreciated from $b 45,000 to $b 67,000 per US$1, while new selling rates of $b 74,330 and $b 75,000, respectively, per US$1 were set for exchange sales to commercial banks and the public sector and to the general public. This adjustment represented a 33.1 percent depreciation on a midpoint basis. In addition, the exchange rate for the purchase of travel tickets administered by the Ministry of Aviation was raised from $b 95,000 to $b 300,000 per US$1. In August the Bolivian authorities announced that the fixed exchange rate arrangement between the peso and the U.S. dollar would be replaced with a more flexible system under which the exchange rate would be determined by means of periodic auctions operated by the Central Bank of Bolivia.

Effective September 2, South Africa reintroduced a dual exchange rate system; the previous system had been discontinued in 1983.

III. Main Developments in Restrictive Practices

This chapter surveys major developments in members’ restrictive practices affecting international trade and financial transactions. These practices take the form either of quantitative restrictions, or of price-related measures involving implicit or explicit taxes and subsidies affecting international transactions. Most of the practices are described in detail in the chronological sections of the individual country pages in Part Two of this Report. References to the detailed descriptions in Part Two may be obtained from the tables annexed to this chapter, which provide summary descriptions and evaluations and are organized on a subject basis, i.e., by the type of practices involved.

Quantitative Import Controls

Protectionist pressures for restrictions on imports continued to prevail in many countries in 1985 as world trade grew much more slowly than in 1984. However, a significant intensification of quantitative restrictions did not take place, and a number of industrial and developing countries took steps toward relaxation of restrictions, as the threat of a relapse into widespread restrictive actions remained strong. Among the industrial countries, Japan, aiming to alleviate trade frictions announced a program to remove various impediments to imports, and New Zealand accelerated the process of phasing out its import licensing system. The United Kingdom’s ban on imports from Argentina was removed. In addition, three developing countries—Bolivia, Somalia, and Zambia—almost completely eliminated import restrictions, and wide-ranging liberalization measures were taken in a number of other developing countries, notably Jamaica, Kenya, Mexico, Morocco, Sierra Leone, and Turkey. Instances of restrictive measures taken by industrial countries were no more numerous than in immediately preceding years, despite intense pressures from industries seeking protection. The United States took some further measures to protect its sugar producers, and, with regard to steel, signed new bilateral agreements with the EC, Japan, and several other countries. The United States imposed a trade embargo on Nicaragua and banned imports of South African kruggerand and Libyan refined petroleum products. Restrictions were intensified in a number of developing countries—extensively in Peru, Seychelles, and Tunisia—but a greater number of countries introduced liberalization measures.

In the industrial countries, all of the broad multilateral changes in quantitative restrictions were in the direction of liberalization. Japan, after announcing in April 1985 a program aimed at opening domestic markets to various categories of imports, released a policy document in July listing actions aimed at increasing imports. These included a relaxation of minimum standards and certification requirements and of the treatment of foreign producers in government procurement procedures. In New Zealand it was announced in September 1985 that the import licensing system for goods not covered by industry development plans would be phased out by 1988. To reduce the restrictiveness of the system in the interim, several measures were announced in 1985. In July authorization was granted for the free transfer of licenses between importers. In September it was announced that from July 1986 licenses for certain items would be issued freely; that those items still subject to licensing would be reviewed in order to determine the basis on which they might be removed from licensing; and that import access would be increased by at least 5 percent of the domestic market on January 1, 1987. In December 1985 the New Zealand authorities decided to liberalize import access for certain types of goods produced by the New Zealand Steel Company. In Italy the minimum values of transactions requiring exchange control and import documentation were both doubled, and in the former case some items were exempted.

Bilateral or unilateral measures taken by industrial countries, relating to general imports from particular countries were mixed in their liberalizing or restricting effects. A Free Trade Area Agreement was signed by the United States and Israel in April 1985 and came into effect in September; it contained a number of measures designed to eliminate all tariffs by January 1, 1995 and to reduce nontariff barriers, including reductions in licensing restrictions and greater access to government procurement procedures. The United Kingdom’s ban on imports from Argentina, in effect since 1982, was removed in July 1985. On the other hand, the United States imposed a trade embargo on Nicaragua in May. Discussions between Canada and the United States also took place in March 1985 on possible ways to reduce existing barriers to bilateral trade. Subsequently, Canada and the United States decided to undertake negotiations for a free trade agreement.

The other measures taken by the industrial countries were specific to particular imports—notably, agricultural products, textiles, steel, and motor vehicles.

Measures taken with respect to agricultural products (notably, sugar and meat) in 1985 were, on balance, restrictive. Canada increased its global quotas on imports of beef and veal, and Japan raised its quota for apple juice. In the United States the import volume of tuna fish subject to tariff-quota was raised by 8 percent, but other changes were restrictive, mainly relating to sugar. In January 1985 the sugar import quota year was extended by two months through November 1985, and emergency quotas were imposed on certain items containing sugar or judged to be interfering with the domestic sugar price support program. Certain exemptions to these quotas were later introduced, and two countries were added to the list of those authorized to sell limited amounts of sugar to the United States.

Restrictions against textile imports were again intensified in 1985. Canada broadened the coverage of bilateral export restraints with a number of Asian countries and reached new bilateral agreements with Bangladesh and Malaysia, all related to specific clothing items. Canada’s special arrangement with Brazil for imports from the latter was also broadened. The EC applied quantitative restrictions on imports from Bangladesh for the first time, and imposed strict limits on imports from Turkey, one of the EC’s largest suppliers. The list of products covered by the bilateral agreement between the EC and Brazil was also expanded. France suspended the automatic issuance of import licenses for cotton cloth originating from Taiwan for the period between May and October 1985 and also imposed a temporary limit on imports of certain textile products from Turkey. A new agreement was reached on restraints on Korea’s cotton yarn exports to Japan. The United States imposed new quota limits on certain textile categories from a number of countries, and concluded bilateral restraint agreements with several countries (including Indonesia and Sri Lanka) following countervailing duty investigations. The United States also tightened its “country of origin” requirements for textile and apparel imports in 1985.

In the steel sector, the United States signed new bilateral agreements with the EC and Japan on exports to the United States from these countries, covering product lines not previously restricted. An agreement with the EC was reached in January 1985 regarding restraints on the EC’s exports of steel pipes and tubes to the United States; this followed a temporary ban imposed by the United States in late 1984 in response to an increase in EC steel imports beyond agreed levels. In August 1985 the United States and the EC reached agreement on quantitative limits for certain steel products that had formerly been subject to consultation only. Subsequently, in November the United States and the EC agreed on quantitative limits on all EC steel products, except semifinished steel, to be exported to the United States in the period January 1986-September 1989; and at the end of the year the United States announced ceilings for semifinished steel for the same period. An agreement reached by the United States with Japan in May 1985 limited Japanese steel exports to the United States to 5.8 percent of U.S. consumption annually in the five years from October 1984. Moreover, the United States entered into bilateral agreements with several other countries, notably, Brazil, Korea, Hungary, and Romania, under which specific limits were placed on exports to the United States. Regarding the EC’s steel import policy, the monitoring and licensing system continued in 1985.

Two industrial countries reduced their restrictions on imports of motor vehicles. At the beginning of the year, Ireland discontinued its special restrictions on motor vehicle imports. In March the United States announced that it would not seek a further extension of Japan’s voluntary restraints on passenger car exports to the United States, which had been in effect for four years. Subsequently, however, Japan announced unilaterally a limit on such exports to the United States in the year ending March 1986, but at a level more than 24 percent higher than in the previous year.

Other measures liberalizing quantitative import restrictions included Canada’s decision to remove quotas on all categories of shoe imports except women’s and girls’ footwear and to phase out the remaining quotas on imported shoes over the next three years, and the announcement by the Japanese authorities of their intention to remove restrictions on imports of refined petroleum products. In addition, the Federal Republic of Germany lifted restrictions on imports of electrical insulators from Japan.

A number of developing countries reduced their import restrictions and simplified their import regimes in 1985. Import restrictions were practically eliminated in Somalia in January. They were also virtually eliminated in Bolivia in August, in conjunction with a floating of the exchange rate, although licensing was later temporarily reimposed for imports of sugar. In Hungary the quasi-automatic import licensing system, which had been replaced in 1982 by a system of quotas and individual approvals, was fully restored. Also, in Zambia it was announced in October, as part of an exchange reform, that import licenses would in the future be issued without restriction. An important liberalization of the import regime took place in Jamaica in April, eliminating quotas and substantially reducing the number of items subject to licensing. Liberalizing measures covering a broad range of imports were also taken in a number of other countries. In Argentina the number of goods eligible for automatic licensing was increased on three occasions (in particular, to include various items of machinery and electrical equipment), and the list of prohibited imports was suspended through the second half of the year. In Grenada the importation of a wide range of goods was liberalized. India, in the context of the import-export policy for 1985-88, abolished in April the automatic permissible import category with respect to raw materials and spare parts. Some 90 percent of the items in this category were placed under open general license, and the remainder were shifted to the limited permissible category. With respect to industrial machinery, some 200 items were added to the open general license category. In addition, the import monopoly of public agencies was abolished for a number of products. Israel lifted in February a six-month ban on the importation of some 50 “luxury” commodities and replaced it with an advance deposit requirement. In Kenya there was a reclassification of certain imports for licensing purposes, which entailed a large increase in the number of items eligible for automatic licensing. In Korea the proportion of import items automatically approved was increased from 85 percent to 87 percent; a large number of items were liberalized, and the Government announced a list of items scheduled to be liberalized at a similar rate during 1986–88. In July the Mexican authorities announced that the process of abolishing import permits and replacing them with protective tariffs was being accelerated. The requirement for import permits was abolished with respect to some 3,600 items. There was also a reclassification of imports in Morocco, entailing a reduction in the number of prohibited items and an increase in the number of goods that could be imported freely. Turkey reduced a previously extensive list of prohibited imports to only three considered dangerous to public security or health, and also reduced the list of items subject to prior authorization. Venezuela removed items classified under some 250 customs headings from the lists of commodities importable only by the public sector or under license.

Several developing countries took liberalizing measures that were less broad in scope than in the countries referred to above, or that were partly offset by some increases in restrictions. Ecuador removed prohibitions on a significant number of import items, but also lowered the priority classification of a smaller number of items and introduced prior authorization requirements for a few imports. Indonesia announced that import invoices for four neighboring countries no longer required official approval, and also normalized trade relations with the People’s Republic of China; but also during the year certain imported materials were made subject to restrictions. Malta lifted restrictions on imports from Italy, which had applied to all items other than industrial materials, spare parts, and essential commodities. Limited liberalization measures were also announced in Algeria, Pakistan, the Philippines, Sierra Leone, the Syrian Arab Republic, and Zimbabwe.

Four developing countries announced modifications of their import regimes in 1985 with overall restrictive or liberalizing effects that are uncertain. Bangladesh introduced two lists of restricted import items to replace the former system of three categories of permitted imports. Items not on the two restricted lists were made freely importable through the secondary market by registered importers. Nigeria modified procedures for licensing imports and allocating foreign exchange, making an import license a guarantee of the availability of foreign exchange up to the value stated on the license. In December Yugoslavia announced that an exchange reform would be brought into effect at the beginning of 1986, under which the right to make import payments will be directly linked to the right to offset the import transaction itself. Imports will be classified into four categories: free, conditionally free, subject to quota, and subject to licensing. Thailand took some liberalizing and some restrictive measures in relation to various import items; their net effect is uncertain.

The number of developing countries in which quantitative import restrictions were introduced or tightened in 1985 was smaller than the number in which liberalization occurred.

Restrictions were increased extensively in three countries. In Peru prior licensing requirements were imposed in August on many items; this action followed the imposition of such requirements on a number of specified items at various times earlier in the year and the establishment of a committee in the Ministry of Commerce, Trade, and Tourism to administer the import licensing system. Import licensing requirements were abolished, however, for imports covered by certain trade agreements with other Latin American countries. In Seychelles all imports were made subject in February to permits and licenses; previously, most goods could be imported freely under open general licenses. In addition, the public monopoly over the importation of certain food staples was extended to other basic foodstuffs. In Tunisia all import items, other than those included in a specified free list (the latter comprising mainly medical products and spare parts not produced locally) or spare parts imported by certain industries for their own use, were made subject to import licensing in July, and in the same month certain capital goods imports became subject to prior authorization. These measures followed a simplification of import procedures in June, including the partial elimination of licensing requirements for goods destined for re-export and small imports of certain raw materials and equipment.

There were also wide-ranging restrictive measures in El Salvador, where some imports were temporarily prohibited, and in Paraguay, where all importers were required to register with the Central Bank to satisfy certain financial requirements and to obtain bank guarantees for imports in excess of twice their capital. Restrictive measures limited to a narrower range of goods were taken in Barbados (various import items); Brazil (steel products and nonferrous metals); Fiji (various foods and certain materials); Honduras (textiles, construction materials, and certain other items); Indonesia (a pesticide and certain plastic materials); Kuwait (certain steel pipes); Nigeria (maize and rice); Rwanda (cement and certain other items); and Western Samoa (capital equipment).

Import Surcharges and Import Taxation

In 1985 world trade was promoted by the accelerated implementation by industrial countries of tariff cuts scheduled under the Tokyo Round, by their renewal of preferential schemes for developing countries’ exports, and by wide-ranging tariff reductions in certain developing countries—notably, Bolivia, Chile, Guinea, Kenya, and Morocco. However, the United States introduced a number of antidumping and countervailing duties, and a number of developing countries increased general duty levels—notably, among the oil producers, Kuwait, Saudi Arabia, and Trinidad and Tobago; and, among non-oil producers, Argentina, Jamaica, Liberia, Mauritius, South Africa, Tunisia, Uruguay, and Zaïre.

In addition to the sixth tariff cut scheduled for 1985 under the Tokyo Round of Multilateral Trade Negotiations (MTN), the seventh installment was implemented one year ahead of schedule on January 1 by Austria, Finland, Norway, Sweden, and Switzerland; and Norway and Sweden also on the same date became the first countries to implement the final (eighth) installment. In the case of the EC, advanced tariff reductions as of January 1, 1985, were confined, in the absence of comparable action by the EC’s trading partners, to several hundred items of export interest to developing countries. The EC announced that should such action materialize in 1985, it would accelerate reductions on the remaining items included in the next annual installment. With effect from April 1, 1985, Japan announced tariff cuts, advanced by two years, on imports of agricultural products from developing countries and nonagricultural products; tariff cuts were advanced by one year on additional agricultural products. In July Japan announced its intention to eliminate or reduce unilaterally tariffs on a number of imports as early as possible in 1986, and also, in the context of a new round of MTN, to reduce tariffs on industrial products to zero along with other industrial countries. In early 1985 the New Zealand authorities issued a discussion paper outlining a tariff reform policy. Later in the year, tariff reductions for 1986 and 1987 were announced.

By the end of 1984, with the extension of the United States’ General System of Preferences (GSP) for eight-and-a-half years to July 1993, all the donor countries had renewed their respective preferential schemes for a further period beyond the initial ten-year period. With respect to more recent changes in GSP schemes, there has been an increased emphasis on extending benefits to the least-developed countries. The United States designated 32 countries as “least-developed” beneficiaries of special trade incentives under the GSP, and these countries were placed in a new category exempted from competitive need limits. Similarly, New Zealand extended to the 36 least-developed countries duty-free access for all products, and adopted a per capita income threshold above which countries could no longer qualify for preferential treatment. Other changes included a major review of the Norwegian scheme that led to the inclusion of additional agricultural and industrial imports; and Japan took steps to improve the GSP by reducing tariff rates and raising quantitative limits. Canada raised general preference tariff rates on motor vehicle parts, but lowered the rates on various goods not produced domestically.

Among other measures taken by the industrial countries, the United States, Canada, and Japan agreed to eliminate tariffs on computer parts, in a move to liberalize trade in high-technology products. Canada implemented the agreement in January 1986, but reinstated tariffs in June 1986. Under the terms of the United States-Israel Free Trade Agreement (referred to in the previous section), most tariffs are to be progressively reduced and eliminated by 1995. Among other liberalizing measures, the United States extended for another year most favored nation (MFN) tariff treatment for Romania, Hungary, and the People’s Republic of China and eliminated import duties on certain aircraft equipment and parts. However, the United States sharply increased duties on pasta products imported from the EC, in retaliation for the EC’s decision not to modify its preferential tariff treatment for citrus fruit from certain Mediterranean countries following a GATT panel finding that the EC preferences were adversely affecting U.S. exports of oranges and lemons. In response to this measure, the EC raised its tariffs on walnuts and lemons from the United States. The United States also imposed anti-dumping duties on a few imports from certain countries and countervailing duties on certain imports, notably, textiles and apparel from Argentina, Mexico, Peru, Sri Lanka, and Thailand.

Among the oil-exporting developing countries, Indonesia introduced a revised tariff schedule linked to the introduction of a value-added tax, and also signed the GATT Code on Subsidies and Countervailing Duties. Otherwise, the measures taken in 1985 were restrictive: Kuwait introduced duties on a number of goods, notably paper and chemical products; Saudi Arabia raised its minimum tariff on dutiable imports from 4 percent to 7 percent; and Trinidad and Tobago imposed a stamp duty of 18 percent on all imports other than food and drugs.

In a number of non-oil exporting developing countries the burden of import duties was reduced, and in some cases there were important and wide-ranging reductions in tariff rates; on balance, liberalizing measures dominated. In Bolivia, tariff rates were reduced to 10 percent of the former rates, plus 10 percentage points. Chile lowered its uniform tariff rate, in two steps, from 35 percent to 20 percent. Guinea eliminated duties on a number of important foodstuffs and reduced those on construction materials by 50 percent. Kenya reduced tariffs by an average of 12 percent on a range of industrial inputs and capital goods, and by 10 percent on unassembled motor cars. Korea reduced the number of items on its “elastic tariff” list by five. Mexico introduced a new tariff structure. Morocco reduced from 10 percent to 7.5 percent the special tax on imports. Limited exemptions from import duties were permitted in Brazil and Tunisia.

In several other non-oil exporting developing countries, changes in tariffs in 1985 were mixed, involving increases for some goods and decreases for others (mainly involving regional or bilateral preferences). Argentina raised its tariffs by 10 percentage points (and by a further 10 percentage points for certain meat products), but reduced the tariff on cotton from 21 percent to zero and granted preferential tariff treatment to certain imports from other Latin American countries. In Peru import tariffs were raised by 5–13 percent in January, and in May the import surcharge was raised from 15 percent to 17 percent; but in July tariff rates on imports from the Latin American Integration Association (LAIA) countries were reduced by 3–7 percentage points, and at various times in the year duties on certain items were reduced or eliminated. In Thailand there was a wide-ranging revision of the structure of import duties, entailing increases for some items and reductions for others. In Uruguay import surcharge rates were raised uniformly by 5 percentage points until the end of 1986, but certain additional Argentinian goods were made freely importable. In Vanuatu the general rate of service tax on most imports was raised from 3 percent to 5 percent at the end of the year, and the exception from duties of government imports was withdrawn; but earlier in the year the customs service tax rate on imports bought by tourists for re-export was lowered from 12 percent to 5 percent. In Dominica, Grenada, and St. Vincent and the Grenadines, in conformity with a Caribbean Common Market (Caricom) agreement of 1984, common external tariffs were raised on certain items, while tariffs on certain regional products were reduced.

In other non-oil exporting developing countries, changes in duties were restrictiv In Belize the stamp duty rate on imports was raised from 8 percent to 10 percent, and the customs administrative fee on entrepot trade was raised from 2 percent to 3 percent. Haiti imposed a surcharge of 1 percent on all imports. In Israel the 2 percent temporary import levy was extended for another year through March 1986. In Jamaica the stamp duty of 6–10 percent applicable to certain imports was raised by 10 percentage points for raw materials, 20 percentage points for capital goods, and 30 percentage points for consumer goods, with various exemptions. Liberia raised all import duties by 10 percentage points. In Mauritius the rate of stamp duty on most imports was raised from 12 percent to 17 percent. In Paraguay a 10 percent tariff was levied on imports from neighboring countries. In South Africa a surcharge of 10 percent was imposed in September on all imports not bound by GATT rules or from the EC. In Togo a tax of 5 percent was levied on soap imports. In Yugoslavia the tax-equalization charge levied on all imports not exempt from customs duty was raised from 6 percent to 7 percent. In Zaïre import duties on alcoholic beverages, tobacco, and certain foods were raised by 3–33 percent.

Advance Import Deposits

In 1985 eight countries eliminated or reduced the scope of their deposit requirements, while in four countries requirements were made more restrictive by the introduction of new schemes.

In Ecuador the advance deposit requirements that had applied to all imports requiring foreign exchange from the Central Bank were eliminated. In Zaïre advance deposits required for the opening of uncovered letters of credit were reduced by half in March 1985 and subsequently eliminated in June. In Egypt advance deposit requirements, which apply to about 25 percent of the country’s imports, were reduced by up to half at the beginning of 1985. In Turkey rates of advance deposit requirements—generally 15 percent since 1983, but with lower rates for certain items—were reduced by a quarter on each of three occasions between June and December. Liberalization of more limited scope applying only to relatively small proportions of total imports took place in Argentina, the Dominican Republic, and Pakistan, while in El Salvador the exchange restriction element of the advance deposit requirement for certain import payments was abolished.

Greece introduced a temporary advance deposit scheme applying to about 40 percent of total imports, at rates of 40 percent and 80 percent for different categories of goods. Israel introduced advance deposit requirements on various “luxury” imports previously banned in February 1985. Initially set at a rate of 60 percent, the requirement was reduced by 3 percent per month, with the exception of July when the rate was reduced by 15 percent with the introduction of the stabilization program. The advance deposit requirement of 15 percent on a range of imports was eliminated in July. A new scheme was also introduced in Western Samoa, applying to the opening of letters of credit for imports of motor vehicles.

Finally, in the Syrian Arab Republic importers who had been waiting to open letters of credit since November 1984 were authorized in May to make advance deposits of 50 percent, and in September, ail rates of advance deposit requirements, which apply to about 8 percent of total imports, were unified at 50 percent.

Other Measures Affecting Import Payments

In 1985 a number of countries modified various regulations governing the terms or procedures for import payments. As in the immediately preceding years, the changes were mainly in the direction of liberalization. Among the industrial countries, Italy doubled the minimum value of imports subject to foreign currency financing in the event that advance payment for the imports is to be made.

A number of developing countries changed their rules governing access to official and parallel foreign exchange markets.

In El Salvador, financing for the full value of imports of most intermediate goods was transferred to the parallel market; previously, 50 percent had been eligible for financing at the official market rate. In Guatemala, which has a three-tier exchange rate system, access to the official foreign exchange market was authorized for certain aid-related imports of foodstuffs, while settlement for certain other items was switched to the banking market from the official market; also, the list of imports eligible to be channeled through the auction market was increased. Guatemala also imposed a 3½ percent tax on foreign exchange operations for imports, with certain exemptions. In Nicaragua a number of measures were taken. In February 1985 eligibility for financing at the principal official exchange rate was granted to payments for specified non-essential consumer goods; a preferential exchange rate was introduced for imports of raw materials, spare parts, and certain essential goods; and another exchange rate, entailing a higher foreign currency price than in the official market, was established for imports of a wide range of capital goods. In April the principal official rate was made applicable to imports of petroleum products. Subsequently, in May it was announced that foreign exchange for payment of imports not eligible for the official market could be purchased in a newly authorized “free” market. In February 1986 a new principal official rate was introduced, entailing a devaluation, and the new rate was made applicable to all imports other than petroleum products, to which the previous official rate continued to apply. In Venezuela, which maintains a four-tier exchange rate system, the authorities in 1985 approved periodic transfers of import items from the list eligible for financing at the first tier (entailing the lowest price of foreign exchange) to those eligible for financing at the third tier.

In Argentina import payments for certain goods originating in Chile, Ecuador, and Paraguay were exempted from minimum financing requirements and were permitted to be settled in full or in part against shipping documents or on credit. Also, the Central Bank announced that the term of import finance would be automatically extended when import payments were not made by the originally agreed maturity date. In Cyprus the maximum value of advance payments for imports was increased five times. In Maldives the regulation requiring all imports to be made on a letter of credit basis was removed. In the Philippines permission was granted to authorized agent banks to sell foreign exchange for imports of specified consumer goods without prior approval of the Central Bank; less stringent minimum payment terms and financing requirements were also introduced for certain imports. In the Syrian Arab Republic private sector manufacturing and crafts establishments were authorized to finance imports and spare parts with letters of credit or bills of collection granted under 180-day credit arrangements; and authorization was also granted for imports of certain agricultural products and equipment under similar arrangements. There were also limited reductions in such restrictions in Honduras, Pakistan, and Thailand.

A number of other developing countries took other liberalizing measures that were partly or wholly offset by new restrictions.

In January Egypt introduced new restrictions on the use of different types of bank accounts for import payments, but these measures were largely reversed in April. In Israel the requirement introduced in 1984, that noncommercial vehicle imports be financed with foreign credit, was eliminated; but the suspension of foreign exchange sales for import prepayment was extended for another year until August 1986. In Nepal the margin deposit requirement for the opening of import letters of credit by firms engaged in projects sponsored by the World Bank was reduced from 30 percent to 10 percent of the value of imports of raw materials, machinery, and spare parts; but the margin deposit requirement on letters of credit for imports of luxury goods was raised from 50 percent to 75 percent. In Somalia the franco valuta import system, whereby imports could be financed with foreign exchange held abroad, was abolished in January 1985, and a regulation was introduced requiring importers to process import documents through the domestic banking system. In November the Somalian authorities permitted the importation of petroleum products by the private sector. In Western Samoa the minimum import payment for which letters of credit were obligatory was halved in September. In the Yemen Arab Republic the proportion of commercial banks’ foreign exchange purchases to be used to finance officially specified imports was raised, and also commercial banks were prohibited from opening letters of credit in foreign currency; subsequently, however, importers were authorized to use up to half of their foreign currency deposits to finance specified imports.

A few countries took restrictive measures alone. Costa Rica introduced a regulation requiring all trade with Central American countries to be settled in U.S. dollars. In Ecuador the Central Bank was prohibited from making advance sales of foreign currency for imports of most goods and services. In South Africa the standstill arrangement introduced in respect of debt repayments was also made applicable to imports received before 1985. In Sudan the authority to validate imports transacted through the commercial bank foreign exchange market was transferred from the commercial banks to the Bank of Sudan, and the financing of imports in that market was restricted to foreign exchange from banks’ own resources or from customers’ accounts. In Zambia a requirement was introduced that air freight charges on own-financed imports should be paid in foreign currency.

State Trading

As in recent years, there were few changes in members’ state trading practices in the period under review. These changes were somewhat in the direction of liberalization on balance. Four countries ended state monopolies: on all imports (The Gambia); tobacco (Haiti); and petroleum (Zaïre). In addition, Hungary granted rights to additional enterprises to engage in foreign trade, and India abolished import monopoly of public agencies over a number of products. Six countries tightened regulations: restricting gold and diamond mining to government and mixed-economy companies (Guinea); requiring exports of wheat and paddy seeds to be canalized through one agency (India); establishing a monopoly on exports of gold and diamonds (Sierra Leone); extending import monopoly to include rice and sugar in sachets (Togo); and creating a national trading corporation for the importation of raw materials by public enterprises (Zaïre).

Exports and Export Proceeds

Measures taken in 1985 affecting exports and export proceeds generally reflected the persistence of difficulties in trade relations among industrial countries and between industrial and developing countries and continued efforts by developing countries to stimulate exports. Only a few industrial countries modified their export practices, and these modifications suggested on balance neither an overall increase or decrease in restrictiveness by this group of countries. The modifications included reduced quantitative restrictions on some exports and tighter limits on others, liberalized provisions for export credits, relaxed licensing requirements for exporters, and a mixed performance with respect to fiscal incentives for exporters. Measures in developing countries included increased fiscal incentives for exports, reduced export taxes, and liberalized foreign exchange surrender requirements, as these countries stepped up their efforts to support exporters in the face of continued although reduced balance of payments difficulties and declining imports. Another factor affecting developing countries was protectionist measures implemented by the industrial countries, to which some developing countries responded by imposing “voluntary” export restraints or by taxing the economic rents created by the protectionist measures abroad. Efforts to reduce supply to export markets in order to counter the effects on prices of weak export markets for commodities, as well as measures to bolster the supply of exportable goods to exporting countries’ domestic markets, were also reflected in increased quantitative controls and export taxation by some developing countries.

There were few major modifications in 1985 in the stance of the major trading countries as regards quantitative restrictions on exports. Responding to pressures from other industrial countries, Japan introduced limits on its exports of steel products to the United States but increased limits on exports of cars to the United States. The limits on Japanese exports of videotape recorders to the EC were lifted in December 1985 and replaced with tariffs in EC countries. The United Kingdom lifted its ban on exports to Argentina. The United States tightened its regulations on exports of computer software and, as part of a package of economic measures against South Africa, banned nuclear exports to that country and computer exports to agencies of the South African government dealing with race relation policies. Seven developing countries banned exports of products, such as cotton (Argentina); steel and sisal fiber (Brazil); sugar syrup and fish oil (Peru); textile products and clothing items exported to the United States (South Africa); petroleum products (Thailand); live birds (Togo); and a broader list of products (Ecuador). Five developing countries granted permission for exports of specific products that were previously restricted (India, Kuwait, Nepal, Thailand, and Tunisia).

There were also a few changes in regulations affecting export licensing. France abolished and the United States simplified licensing requirements, and the United States imposed licensing requirements on exports to Nicaragua. Actions by developing countries were mixed. Five countries liberalized their licensing system (Ecuador, India, Peru, Somalia, and Western Samoa), and two others (Suriname and Thailand) tightened theirs.

Only two industrial countries changed their fiscal incentive schemes for exports. New Zealand substantially reduced such incentives, and the United States increased subsidies to agricultural exports through the newly implemented Export Enhancement Program. A larger number of developing countries increased export incentives by increasing rebates on all products exported (Argentina, Bangladesh, Costa Rica, Hungary, and Mexico) or on specific products or groups of products (Argentina, Hungary, India, Pakistan, Peru, Thailand, and Uruguay). Only two developing countries reduced fiscal incentives by eliminating or reducing rebates (Nepal and Turkey). Several developing countries reduced export taxation (Argentina, India, Indonesia, and Thailand); a few (Brazil, Dominican Republic, and Malawi) imposed taxes on exports.

Three industrial countries increased the access of exporters to credit facilities. France relaxed regulations for provision of export credits by the private sector, and New Zealand terminated the suspensory loan scheme. Foreign currency financing requirements for exports were abolished in Italy. Only two developing countries used this policy instrument actively in 1985 in the direction of increased official support, by establishing new bilateral lines of credit or renewing existing ones (Argentina), and by reducing below-market interest rates applicable to these lines of credit (Argentina and Brazil).

In the area of export or exchange guarantees, two industrial countries modified regulations involving these schemes. Switzerland raised the premia paid on export risk guarantee and suspended foreign exchange risk coverage indefinitely, and the United Kingdom set up a new export insurance scheme for exports to smallest countries. Israel limited official liability under an exchange rate insurance scheme, and Tunisia implemented the export credit insurance scheme which had been introduced in 1984.

Requirements for the surrender of export proceeds were modified in several developing countries, mostly in the direction of permitting larger retention quotas or reducing the proportion of proceeds to be surrendered at the official exchange rate. Major modifications were introduced in eight countries (Bangladesh, Benin, El Salvador, Guatemala, Madagascar, Mexico, Somalia, and Tanzania), and four other countries (Honduras, Nicaragua, Paraguay, and Sierra Leone) implemented measures affecting specific products. Only four developing countries tightened surrender requirements, limiting the surrender period to 30 days (Peru) and increasing the proportion of exports to be surrendered at the official exchange rate or tourism market rate (Sudan, Syrian Arab Republic, and Yugoslavia).

Various other measures were implemented in the period under review, generally with the intention of supporting exports or streamlining administrative procedures. Information requirements and review processes for export activities were simplified in the United States. Several developing countries tightened their administrative procedures, requiring that settlements of trade with Central America be made in U.S. dollars (Costa Rica); requiring letters of credit arrangements for specified exports (Nepal); establishing reporting and eligibility requirements for exporting firms (Paraguay); and requiring proof of availability of foreign exchange on the part of the foreign importer (Trinidad and Tobago). Two developing countries liberalized administrative procedures authorizing additional locations for export and import activities (Indonesia), and abolishing inspection and export clearance requirements with limited exceptions (Philippines).

Current Invisibles

Regulations governing current invisibles were somewhat relaxed on balance in 1985. Most of the measures related to foreign exchange allocations for tourism and other travel abroad. Measures were also taken to effect payments for services performed by nonresidents, as well as holdings of foreign currency and imports and exports of bank notes and coins. All changes in regulations tightening current invisible transactions were undertaken by the developing countries, in an attempt to reduce capital flight and to curb use of foreign exchange for tourism.

During 1985 three industrial countries relaxed regulations on foreign exchange allocations by raising outward remittances for family support (France); by relaxing regulations for the use of credit cards abroad (Italy); or by increasing allocations for business and tourist travel (Spain). Among developing countries, several countries increased basic travel allowances (Chile, Cyprus, Morocco, Portugal, Somalia, Tunisia, and Zimbabwe); authorized use of credit cards abroad (Israel); lifted prohibition of official foreign exchange sales for tourist travel to Italy (Malta); abolished foreign exchange allowance for tourist travel (Ethiopia); and transferred purchases of foreign exchange for travel and medical treatment to the banking market (Guatemala). Cyprus, Morocco, and Zimbabwe raised education allowances; and El Salvador abolished the restrictive aspect of the advance import deposit on foreign exchange requests for medical treatment abroad. A few developing countries tightened regulations governing foreign exchange allocations for travel by reducing or establishing allowances for travel (Israel, Ethiopia, and Suriname) and lowering limits on exchange available for studies abroad (Korea).

Regulations governing outward transfers or payments for services rendered by nonresidents were modified in only one industrial country (Finland), where the requirement of central bank approval for transfer abroad of dividends on nonresident direct investment was abolished. Japan announced its readiness to discuss the relaxation of existing restrictions on services (as part of the so-called Action Program). Several developing countries relaxed regulations on all invisible payments (Bolivia); on outward remittances concerning membership fees (Bangladesh); pension funds (Barbados); various types of invisibles (Botswana); transfer privileges (Libya and Morocco); workers’ remittances (Iraq and Philippines); freight and interest charges (Brazil and Philippines); repatriate remittances (Morocco and Zambia); and profits and dividends (Zimbabwe). A stamp duty on purchases of foreign exchange was eliminated in Nepal and an ad valorem tax on travel tickets was abolished in Dominica. Also, conversion of foreign exchange proceeds from invisibles was transferred to the parallel or free market in El Salvador and Nicaragua, and Somalia authorized exchange retention quotas. Payments for invisibles were effected through the banking market in Guatemala.

Several developing countries tightened regulations on outward transfers concerning leasing of real estate abroad (Brazil); some specified invisible payments (El Salvador); payments of wages in foreign currency abroad to nationals (Israel); profit remittances (Nigeria and South Africa); and sales of transportable goods and pension payments (Suriname). Israel imposed a surcharge on airline and sea tickets and extended the period for application of the tax on imports of services. Maldives required documentary proof of sales of foreign exchange from tourist resorts and foreigners when paying domestic taxes and rents; Sudan granted a bonus on workers’ remittances; and Sierra Leone and Suriname required nonresidents to exchange specified minimum amounts of foreign currency when entering the country.

Regulations affecting the import and export of foreign and domestic currency notes and coins and holdings of foreign currency were relaxed in two industrial countries (Iceland and Spain). Among developing countries, Cyprus increased the maximum amount of Cyprus bank notes that could be imported or exported; Guinea authorized residents to hold foreign currency; Nepal authorized commercial banks to accept specified deposits denominated in U.S. dollars and pounds sterling and regulated withdrawals on these deposits; Pakistan increased the maximum period from day of arrival for nationals to hold foreign currency accounts and authorized dealers to accept specified deposits in foreign currency; and the Philippines tightened regulations on over-the-counter purchases of foreign coins. Sudan imposed restrictions on “free” foreign exchange accounts and prohibited private nonbank exchange dealers to conduct foreign exchange operations.

External Payments Arrears

Payments arrears are attributable to a variety of causes; the Fund’s data on members’ payments arrears cover arrears that have been caused by exchange restrictions on current payments or transfers, as well as arrears on financial obligations of which the obligor is the government or a resident in the country in question and which are overdue for balance of payments or fiscal reasons.5 An increase in arrears adversely affects the country’s creditworthiness, with the result that access to normal means of international financing is frequently curtailed. A further consequence is that the cost of international credit, as well as of imported goods and services, becomes higher than would otherwise be the case for most borrowers. In view of the particularly adverse consequences for the country maintaining arrears and for the international payments system, performance criteria for the elimination or substantial reduction of payments arrears in an orderly and nondiscriminatory manner constitute an important element of members’ economic programs supported by the use of the Fund’s resources.6 Moreover, the incurrence of arrears and related policies have been subject to careful scrutiny in the context of Article IV consultations with the Fund. The Fund has also consistently followed the practice of not approving under Article VIII, Section 2(a) of the Fund’s Articles of Agreement exchange restrictions evidenced by arrears on current international payments, except when a satisfactory program for a reduction or the elimination of arrears is in place.

During 1985 the total payments arrears (including government defaults) of Fund members declined significantly for the first time in recent years, mainly as a result of restructuring. At the end of 1985, they amounted to SDR 27 billion, reversing the increasing trend of the 1982–84 period. However, the number of Fund members incurring payments arrears (including government defaults) remained at its peak of 49 reached at end-1983. Of the 49 member countries incurring, or believed to be incurring, external payments arrears (including government defaults) at the end of 1985, information for the end of 1985 is available for the following 48 countries: Antigua and Barbuda, Argentina, Benin, Bolivia, Brazil, Burkina Faso, Central African Republic, Chad, Comoros, People’s Republic of the Congo, Costa Rica, Dominican Republic, Egypt, El Salvador, Equatorial Guinea, The Gambia, Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Jamaica, Liberia, Madagascar, Mali, Morocco, Mozambique, Nicaragua, Nigeria, Paraguay, Peru, St. Lucia, Senegal, Sierra Leone, Somalia, Sudan, Suriname, Tanzania, Uganda, Venezuela, Viet Nam, Western Samoa, Yugoslavia, Zaïre, and Zambia. Data at the end of 1985 for São Tomé and Principe, which had payments arrears at the end of 1984, are not available, but it is unlikely that it was able to eliminate outstanding payments arrears in the course of 1985. During 1985 payments arrears (including government defaults) were eliminated in Belize, Côte d’Ivoire, Ecuador, Mauritania, the Philippines, and Togo; and in one country, Senegal, payments arrears (including government defaults) emerged for the first time since 1981. In the course of 1985, of the countries that had payments arrears (including government defaults) at the end of 1984, the outstanding amount rose in 25 countries (Antigua and Barbuda, Bolivia, Burkina Faso, Chad, Comoros, People’s Republic of the Congo, The Gambia, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Jamaica, Liberia, Morocco, Mozambique, Nicaragua, Paraguay, Peru, Sierra Leone, Sudan, Suriname, Tanzania, and Uganda), and declined in 15 countries (Argentina, Central African Republic, Costa Rica, Dominican Republic, El Salvador, Equatorial Guinea, Ghana, Madagascar, Nigeria, Somalia, Venezuela, Viet Nam, Western Samoa, Zaïre, and Zambia).

During 1985 external debt obligations to official creditors and commercial banks of 22 Fund member countries, which in some instances were in arrears, were rescheduled and/or refinanced. In addition, negotiations were in progress with two countries. The total amount of external debt obligations that were restructured in 1985 is estimated to have amounted to SDR 13 billion, compared to SDR 23 billion at the end of 1984.

At the end of 1985, adjustment programs supported by stand-by or extended arrangements from the Fund, all in the upper credit tranches, were in effect in the following 17 countries that were identified as incurring payments arrears (including government defaults) during 1985: Argentina, Central African Republic, Costa Rica, Côte d’Ivoire, Dominican Republic, Equatorial Guinea, Ghana, Jamaica, Madagascar, Mali, Mauritania, Morocco, Senegal, Somalia, Yugoslavia, Zaïre, and Zambia. All programs provided for a phased reduction or elimination of payments arrears (including government defaults) during a specified period as a performance criterion. Eight of these countries reduced, and three of them eliminated, payments arrears (including government defaults) by the end of 1985. In a number of adjustment programs, a counterpart deposit requirement in local currency was introduced as a means of maintaining a reliable record on payments arrears (including government defaults) and of monitoring the bona fides of foreign exchange applications.

Multiple Currency Practices

Article VIII, Section 3 of the Fund’s Articles of Agreement prohibits a member from engaging in, or permitting its fiscal agencies to engage in, any discriminatory currency arrangements or multiple currency practices without the approval of the Fund. Such practices may arise not only from the existence of separate exchange rates but also from the application of exchange taxes or subsidies, nonpayment of interest on advance import deposits and counterpart deposits against payments arrears, and broken cross rates. The Fund normally approves multiple currency practices when a well-conceived plan is in place to bring about the unification of the multiple exchange rates or to abolish exchange measures giving rise to such practices during a specified and relatively short period of time. In many instances, the staff assists the authorities to formulate such a plan, especially in the context of adjustment programs supported by the use of Fund resources.

In April 1984 and February 1985 the Executive Board reviewed the Fund’s experience and policies with respect to multiple exchange rate regimes.7 In the context of a discussion in early 1985 of multiple currency practices applicable solely to capital transactions, the Executive Board did not adopt a view on the question of Fund jurisdiction over these practices under Articles VIII and XIV, leaving the matter open for further consideration. At the same time, it was agreed that members should continue to provide the Fund with specific and full information on capital controls and multiple currency practices applicable solely to capital transactions, and that the Fund will continue to assess the economic consequence of such practices in the context of its surveillance activities. The experience of the Fund membership with regard to practices that segment foreign exchange markets precisely on the basis of current and capital transactions has been limited; very few countries have multiple currency practices that are identified as relating solely to capital transactions.8 In most of these instances, these practices have not taken the form of a separate exchange rate for capital flows in general, but rather for specific components of the capital account, and they have served as an adjunct, and not as an alternative to, quantitative controls on other forms of capital transactions. Furthermore, the spreads have generally been maintained at a more or less steady depreciated rate over extended periods of time, have varied mainly in response to nonbalance of payments factors, or have been subject to infrequent discretionary change—all of which indicate that these practices have played a limited “buffering” role for variations in capital movements.

During 1985 there was an overall decline in the use of multiple currency practices by the developing countries, following little change in 1984 and reversing the trend of increased use of multiple currency practices in the earlier part of the decade. Sixteen member countries eliminated or simplified multiple currency practices, while ten member countries introduced multiple currency practices. One member country introduced and eliminated a multiple currency practice in the course of the year.

Multiple currency practices were eliminated in the seven member countries as follows. The People’s Republic of China eliminated an internal settlement rate applicable to trade transactions on January 1. In August Bolivia abolished an export retention scheme that was introduced in February and adopted a floating unitary exchange rate system. Ecuador abolished advance import deposit requirements in March. When Equatorial Guinea joined the Bank of Central African States (BEAC) on January 1, it eliminated the tax that had previously applied to transfers of net investment income. With effect also from January 1, Hungary began to adjust the exchange rate of its currency on a daily basis, thus eliminating the possibility of the emergence of a multiple currency practice in the form of broken cross rates arising from the previous practice of weekly rather than daily quotations. With effect from November 30, Nepal eliminated a revenue stamp duty on foreign exchange purchases and a cash export subsidy scheme, eliminating the multiple currency practices involved. Zaïre, in June, eliminated the multiple currency practice arising from a 30 percent minimum mandatory deposit requirement for uncovered letters of credit.

Multiple currency practices were simplified in nine countries during the period under review. Argentina eliminated a 10 percent rebate for nontraditional products in June, but reintroduced it for a few of these products in October. Brazil reduced the financial transactions tax to zero on sales of foreign exchange for imports of rice from member countries of the LAIA in January and on September 6 reduced it to zero on sales of foreign exchange for imports of salt products and rice for the remainder of 1985. The financial transactions tax on sales of foreign exchange for imports of rice was also reduced to zero for the period September-November 1985. Colombia eliminated, in March, the 10 percent tax credit certificates (CERT) applying to exports to the member countries of the LAIA. Ecuador completed the unification of the official exchange market in November by changing the official exchange rate from S/. 66.50 = US$1 (buying) to S/. 95.00 = US$1. Only the transfer of surpluses generated by foreign oil companies during the period April-August 1985 is effected at the exchange rate of S/. 67.85 = US$1, irrespective of the official exchange rate that may prevail at the time of transfer. On July 11 Mexico abolished the “free exchange market” rate that was officially set but was managed by the commercial banks and that covered transactions not authorized through the “controlled market.” On August 5 the controlled market began to operate on the basis of a managed floating system under which the exchange rate underwent daily adjustments. Parties eligible to participate in the controlled market may either choose to transact at an exchange rate agreed between those parties and the financial institutions authorized to operate in this market or at the “equilibrium exchange rate” of the day, to be determined at the fixing session held at the Bank of Mexico through a bidding process. In November Nepal eliminated revenue stamp duties on foreign exchange purchases and a cash export subsidy scheme. In February Nicaragua announced a modification of the exchange system, which entailed an effective depreciation of the córdoba, the elimination of mixing exchange rates for export proceeds and the exchange tax, and the introduction of new exchange rates, including a free exchange market for transactions not included in the official markets. New official exchange rates consisted of five fixed rates: C$10 = US$1; C$20 = US$1; C$28 = US$1; C$40 = US$1; and C$50 = US$1. Sudan reduced the number of its exchange markets to two in February: the official market, in which the exchange rate for the Sudanese pound was depreciated by 48 percent to LSd 2.50 = US$1; and a commercial bank market operated by authorized banks, in which authorized banks were permitted to set their own buying and selling rates for foreign currencies. The Syrian Arab Republic, in May, discontinued the practice of requiring most export proceeds to be surrendered partly at the official rate and partly at the parallel rate; with the exception of exports of petroleum and phosphate (effected at the official rate) and exports of fresh fruits and vegetables (effected at the tourist rate), all other export products were effected at the parallel rate. Also, in September the Syrian Arab Republic replaced varying rates of advance import deposit requirements for the private sector with a uniform 50 percent deposit requirement.

During 1985 multiple currency practices were introduced in ten countries. In February Bolivia allowed private exporters to retain 30 percent (in the case of nontraditional products and mining cooperatives, 40 percent) of their export proceeds in foreign exchange to purchase imports or to convert them at the parallel exchange rate. This practice was eliminated in August when a floating unitary exchange rate was introduced. At the same time, Bolivia introduced a foreign exchange reimbursement certificate equivalent to 10 percent of the amount of foreign exchange surrendered. These certificates were permitted to be used for foreign exchange purchases in the auction market or for the payment of the 10 percent deposit requirement for exports. The practice, since January 23, in the Dominican Republic of conducting official foreign exchange transactions at average buying and selling rates that have been determined by reference to the rates prevailing during the preceding five days gave rise, on occasion, to excessive exchange rate spreads. In October Guinea introduced a dual exchange rate system, with a second rate of GS 36 = F1 that represented a depreciation of 92 percent, compared with the exchange rate for the syli in the official market. The second rate was limited to sales to the banking system of foreign exchange originating from capital inflows, for investment, nonmining export receipts, grants, expenditures for tourist and business travel purposes, transfers, and sales of instruments of payments denominated in foreign exchange. In March Honduras introduced a scheme whereby transactions with the rest of the Central American countries are permitted to be effected through a secondary foreign exchange market. Export proceeds channeled through the Central American Clearing House, which previously had to be surrendered to the Central Bank, were permitted to be retained by exporters in special foreign currency-denominated deposits with commercial banks; and these deposits were permitted to be used by exporters to pay for their own imports of goods and services from the country from which the foreign exchange originated, or be transferred for one time only to a third party at a freely determined exchange rate. During 1985 private importers in the Lao People’s Democratic Republic reorganized their activities into a joint cooperative venture with the municipality of Vientiane, and foreign exchange was made available to this organization at an exchange rate of KN 300 = US$1. As from January 1, Somalia permitted the shilling to float, on a temporary basis, for the bulk of private sector transactions. In September the Syrian Arab Republic introduced another exchange rate for medical and tourist expenditures abroad, thus widening the spread between the most appreciated and the most depreciated official exchange rates. On January 9 Trinidad and Tobago introduced a 10 percent tax on the sale of foreign exchange for vacation and business travel and on remittances to persons who had or were planning to emigrate from the country. The tax was eliminated in December when the exchange rate was adjusted from TT$2.40 = US$1 to TT$3.60 = US$1. The exchange rate of TT$2.40 = US$1, however, continued to apply to imports of essential goods (i.e., food items, drugs, certain agricultural products, and school books). The Yemen Arab Republic permitted all exchange transactions, with the exception of certain government transactions, to take place in the official secondary market for foreign exchange in April. When Zambia introduced an auction system in October, expatriate remittances continued to be made during the period October 3 to end-December 1985 at the pre-auction exchange rate ruling on October 3.

During 1985 six countries (The Bahamas, France, Italy, Lesotho, Mauritius, and South Africa) maintained multiple currency practices applicable solely to capital transactions. There have been no changes in the systems of these countries since 1984, with the exceptions of Lesotho and South Africa which reintroduced the dual exchange rate system that had been discontinued in 1983.

Bilateral Payments Arrangements and Countertrade Practices

The 1985 Annual Report on Exchange Arrangements and Exchange Restrictions noted that at the end of 1984 the total number of bilateral payments arrangements maintained between Fund members was 52, compared with 53 at the end of 1983, and that the total number of bilateral payments agreements maintained between Fund members and non-Fund members was 84, remaining unchanged for the second consecutive year.

During 1985 two bilateral payments agreements maintained between Fund members were terminated; in February the bilateral payments agreement between Finland and Hungary was terminated, and in May the bilateral payments agreement between Ecuador and Romania was terminated. Consequently, as of the end of 1985, the total number of agreements maintained between Fund members declined by 2 to 50, while that of agreements between Fund members and non-Fund members remained unchanged at 84.

Detailed information on the value of trade conducted under bilateral payments arrangements is not available for most Fund members maintaining such arrangements. On the assumption that the value of trade between Fund members maintaining bilateral payments agreements represents the maximum value of trade conducted under bilateral payments arrangements, the total value of such trade is equivalent to about 17 of 1 percent of the value of world trade of Fund members.

In recent years, as noted in the 1984 and 1985 issues of the Annual Report on Exchange Arrangements and Exchange Restrictions, there has been a growing resort in some countries to trading practices known as countertrade arrangements.9 These arrangements have taken a variety of forms, but basically they are barter or quasi-barter arrangements between private firms and/or government entities, such as foreign trade organizations, under which the seller is obligated to accept specified goods or services from the buyer. Even though countertrade arrangements are for the most part carried out by private firms without official sanction, several countries have recently issued guidelines to be followed by individual entities while engaging in countertrade, or regulations making countertrade mandatory for certain international transactions. The more common countertrade arrangements are known to have involved exchange of crude oil for manufactured goods. Some of the developing countries that have frequently engaged in countertrade arrangements include Argentina, Brazil, the People’s Republic of China, Colombia, Greece, Guyana, Indonesia, the Islamic Republic of Iran, Iraq, Jamaica, Malaysia, Mexico, Nigeria, Turkey, Venezuela, and Viet Nam. These and many other developing countries have concluded countertrade arrangements with private firms in the industrial countries or centrally planned Eastern European countries aimed at promoting exports of primary products (including crude oil), and in some instances, servicing of external debt. Official requirements for countertrade are known to exist in some developing countries (Argentina, Colombia, and Indonesia).

The emergence and recent growth of countertrade may be attributed to several factors. In the centrally planned Eastern European countries, countertrade is often seen as supporting the central planning process by reducing the uncertainties for the domestic production plan that result from the difficulty in forecasting foreign demand. It is also a means of achieving bilateral balancing of trade, which is an important objective of foreign trade policy in most of these countries.

Shortages of convertible foreign exchange and the desire to stimulate the inflow of technology from abroad have also motivated Eastern European countries to enter into countertrade arrangements. The balance of payments difficulties of developing countries in recent years have led some of these countries to seek new financing techniques, given their scarce foreign exchange resources. The pressures to find markets for surplus goods or the difficulties of gaining access to the markets of the industrial countries for certain primary and manufactured products have also prompted some developing countries to enter into countertrade arrangements that commit industrial country exporters to purchasing a given quantity of products over a specified period. In certain cases, countertrade in the form of buy-back arrangements is seen—by both industrial and the more advanced developing countries—as a means of securing reliable sources of essential raw materials while exporting equipment and technology that have become outdated at home. In other cases, countertrade may have become the only way for exporters (including those in industrial countries) to overcome the protective trade policies of some countries, or to trade with centrally planned East European countries.

Although the volume of trade conducted under countertrade arrangements does not appear to be large in relation to world trade,10 the proliferation of such practices is detrimental to the maintenance of the multilateral system of trade and payments. Countertrade practices may entail many of the undesirable restrictive and discriminatory practices traditionally associated with bilateralism. Where countertrade practices result from a direct governmental limitation on the use, availability, or transfer of exchange as such, they may entail exchange restrictions and multiple currency practices subject to approval under Article VIII of the Fund’s Articles of Agreement.

Although countertrade practices may be viewed as having some temporary advantages, such as access to restricted markets, or in some circumstances implicit valuation of exports at a more depreciated exchange rate, they have a number of shortcomings. Apart from the basic issue of inefficiency of resource allocation, some of the more common serious disadvantages generally encountered are: (1) a limited choice of products or services that are available for trading at internationally competitive prices; (2) poor quality of goods; (3) the difficulty of marketing products that are not directly consumed by the buyer, especially when the seller places geographical or commercial restrictions on the marketing of products; and (4) a higher product cost resulting from payments of commissions or fees to the middleman handling sales of products and from bridge financing that may be required, owing to long delivery dates. Countertrade arrangements also tend to increase the cost of trade, as additional risks not usually present in normal bank-financed foreign trade must be covered. The use of countertrade has been proposed in some quarters as a means by which countries with heavy debt service burdens can improve their trade balances through access to markets where these are otherwise restricted. Such an approach might offer temporary access to markets for these countries, but additional export earnings can be used to service external debt only with mutual agreement of the parties concerned.

Forfaiting is another practice that is often used to hedge against risks, including risk of non-payment, which cannot be covered by official export financing schemes. Unlike countertrade, however, forfaiting represents an extension of traditional banking practice to export financing. Forfaiting consists of discounting bills of exchange or promissory notes without recourse to the exporter. Although it may be used for all export transactions, in practice it has been applied mainly to exports of capital goods with credit terms of five to seven years maturity. The advantage for the exporter is that the commercial risk as well as the exchange rate and interest risks are transferred to the forfaiter. The alternative for the exporter is usually to finance exports at variable interest rates. Although forfaiting was developed for exports to Comecon countries and certain Latin American countries, it is not used widely for trade with high-risk countries.

Capital Controls

Liberalization of international capital movements continued to take place in 1985 in both industrial and developing countries. For the group of industrial countries this liberalization represented continuation of a trend that has been apparent for several years, while for the developing country group it was the second year in succession of relaxation of capital controls.

While in some industrial countries capital controls were relaxed in order to promote capital outflows and thus offset external current account surpluses, in other countries the measures were motivated mainly by the desire to increase the efficiency and competitiveness of domestic financial markets. The impact of dismantling capital controls was reinforced, in a number of industrial countries, by deregulation of domestic banking, changes in the tax treatment of capital transactions, and broadening of the range of permissible financial instruments. These developments have contributed to increased integration and competitiveness of international capital markets, and have also had the effect of encouraging other countries to consider changes in their regulations. In developing countries, although the external financing situation of many countries remained as difficult in 1985 as in the previous year, the changes in capital regulations were predominantly in the direction of liberalization rather than intensification of restrictions. The liberalization measures in a few developing countries were part of a general reform of the financial sector that had the aim of broadening and developing financial markets by permitting foreign participation in the domestic market and residents’ access to foreign markets. Some developing countries, however, reacted to a strained balance of payments position by tightening restrictions, particularly those affecting direct investment and the ability of residents to maintain foreign exchange deposits.

During 1985 four industrial countries liberalized regulations affecting international transactions of commercial banks. The regulations related to capital inflows in the form of financial loans (Denmark and Italy), and to capital outflows to the Euro-yen market (Japan). In addition, Finland liberalized forward exchange market transactions. Liberalization also took place in eight developing countries, including the removal of all controls on capital outflows (Bolivia); the removal of a surcharge on foreign exchange earnings (Dominican Republic); the transfer of capital transactions from the official to the parallel foreign exchange market (Guatemala); the removal of discriminatory regulations for foreign banks (Korea); permission, subject to certain conditions, for residents to draw on commercial overdraft accounts abroad (Israel); the removal of a withholding tax on interest payments to nonresidents (Malaysia); transferability of capital accounts (Morocco); and the relaxation of permissible foreign exchange holdings of commercial banks (Turkey).

Only a few industrial countries adopted measures tightening regulations governing capital flows through commercial banks. Norway tightened regulations on bank loans denominated in foreign currencies. The United States, as part of a package of economic sanctions against South Africa, prohibited bank loans to the government of that country. Five developing countries tightened regulations for commercial banks’ foreign operations, including a lengthening of permissible maturities on certain capital inflows and a shortening of permissible maturities on certain capital outflows (Argentina); a tightening of approval procedures for money changers (Bahrain); a standstill arrangement for debt repayment (South Africa); the introduction of registration requirements for all foreign borrowing by the private sector (Thailand); and a reduction in limits on the net foreign asset position of banks (Zaïre).

On balance, regulations on resident and nonresident foreign exchange accounts were liberalized in 1985. Two industrial countries relaxed such regulations affecting deposits with domestic banks (Denmark) or with foreign banks (Norway); there was no tightening of regulations in this group of countries. Four developing countries liberalized access by residents to foreign exchange deposit accounts (Greece, India, Nigeria, and Somalia); and Ghana liberalized regulations affecting both resident and nonresident accounts. Increased restrictions on foreign exchange accounts in this group of countries took the form of increased reserve requirements on foreign exchange deposits in Argentina, and suspension of the foreign exchange scheme that permitted residents and nonresidents to hold foreign exchange accounts in Jamaica.

Restrictions on portfolio investments were liberalized in many industrial countries and in a few developing countries in 1985, while regulations were tightened only in Finland. The access of residents to foreign securities was eased in Denmark, France, Italy, and Norway. In Japan capital transactions in the Euro-yen market were promoted through relaxation of the standards for issuing Euro-yen bonds, liberalization of Euro-yen loans to nonresidents, a broadening of the instruments permitted in the market (e.g., floating rate notes, dual currency bonds, currency conversion bonds, deep discount bonds, and zero-coupon bonds), and elimination of the withholding tax on interest income in Euro-yen bonds owned by nonresidents. Capital inflows through portfolio investments were liberalized in Italy and Spain. Restrictions on foreign banks’ participation in the domestic capital market were eased in Japan and the Federal Republic of Germany. In addition, the issue calendar for foreign bonds was suspended in the Federal Republic of Germany. Two developing countries (Korea and Singapore) relaxed regulations affecting portfolio investment. In the case of Korea, the measures were part of a policy aimed at developing the domestic capital market by permitting nonresidents to purchase domestic securities; in Singapore the measure concerned the treatment of tax privileges on income earned from loan syndication. In Finland the sale abroad of bonds and debentures quoted in the stock exchange was prohibited.

Regulations concerning direct investment were liberalized in four industrial countries, and no industrial countries tightened such regulations. Regulations governing direct investment inflows were liberalized in Australia, Denmark, and France; and direct investment outflows were liberalized in Denmark and Italy. Among the developing countries, four countries (Ecuador, Korea, Malaysia, and Nigeria) liberalized regulations concerning direct investment. In all four cases, the liberalization related to capital inflows. In contrast to the general movement toward liberalization of direct investment in 1984 noted in that year’s Report, one developing country introduced legislation that hampered direct investment inflows (Argentina).

Gold

As in recent years, very few regulations governing ownership of and trade in gold were introduced. Australia announced on August 19 a range of economic sanctions against South Africa, including the prohibition of dealings in krugerrand. A bill authorizing the United States Treasury to mint gold coins was signed by the President on December 17, 1985. In December 1985 the Foreign Exchange Board of Sweden abolished the prohibition on imports and exports of unworked gold, certain gold products, and gold coins, thus ending the regulation of trade in gold. South Africa amended certain regulations concerning transactions in gold. The premiums on krugerrand sold by the company “Intergold” to local distributors were reduced. As an interim measure, the Reserve Bank decided on January 29 to pay the gold mines in U.S. dollars for only 50 percent of their sales; the rest would be settled in rand. On December 9 a new regulation required payments to gold mines for gold purchases to be effected in rand and not partly in U.S. dollars as previously arranged.

IV. Main Developments in Regional Arrangements

Several measures to foster regional cooperation were taken in 1985. Prominent among these were the preparations for the entry of Portugal and Spain into the EC.11 In March member countries of the EC agreed on issues concerning entry terms for Portugal and Spain. A treaty governing both countries’ accession was signed on June 12, and their membership became effective on January 1, 1986. Integration into the EC is being governed by a series of transitional arrangements. As regards industrial products, a seven-year timetable was established for the enlarged EC membership to achieve a phased, reciprocal dismantling of tariffs on industrial products and alignment of external tariffs. A transition period of up to ten years was adopted for Portugal for its implementation of the EC’s Common Agricultural Policy (CAP).12 Other EC members will phase out most duties on Portuguese agricultural exports over six to eight years, and the financial resources of the EC will be made available to Portugal for agricultural development projects. Portugal will also be permitted to maintain certain quantitative import restrictions vis-à-vis both third countries and other EC members in the transition period; and similarly, other EC members will be permitted to maintain certain restrictions on imports from Portugal. However, all import restrictions that had been maintained by Portugal for balance of payments purposes were eliminated, effective January 1, 1986. Payments associated with current transactions were to be fully liberalized on accession, with the exception of tourism allowances, which may be subject to restriction up to end-1990. Certain restrictions on capital outflows may continue up to end-1990, including regulations governing outflows of a personal nature, the repatriation of profits on property investments, and the limits on subscriptions to bond issues by the European Investment Bank or the EC; liberalization of some direct investment to other member countries may be postponed until December 1992. As regards investment in Portugal by residents of other member states, liberalization in respect of some transfers for buildings or land may be postponed until end-1990 (although a prior authorization scheme will end by end-1989).

In the case of Spain, implementation of the Common Agricultural Policy is expected to be largely completed within a seven-year period, although the transition period will last ten years for fresh fruits and vegetables and vegetable oils. Most nontariff barriers between Spain and the EC were to be eliminated upon accession. However, Spain will maintain quantitative restrictions for three years on imports of color televisions and certain farm tractors, and for four years on certain cotton textiles and a limited number of other products. The EC can also maintain quantitative restrictions for four years on certain textile imports from Spain. Removal of quantitative restrictions will be phased over the respective periods. Spanish steel exports to the EC will continue to be limited for three years, during which period Spain will phase out state aid for steel. EC financial resources will be placed at Spain’s disposal to facilitate the process of agricultural and industrial restructuring implied by the integration. With some exceptions, Portugal and Spain will apply the same treatment to each other as they apply to other members of the EC.

In 1985 the EC held ongoing negotiations with nonmember Mediterranean countries,13 with a view to adapting existing preferential agreements to the enlarged EC so as to ensure that traditional trading patterns are maintained. On December 8, 1984 a new EC-ACP convention (Lomé III) was signed by representatives of the EC and 65 countries of the African, Caribbean, and Pacific States.14 The new convention is to run for five years starting March 1, replacing Lomé II, which expired on February 28. However, as Lomé III did not come into force until May 1, 1986, transitional arrangements were made to allow use of the money still left under Lomé II. Lomé III has provisions similar to its predecessor agreement for development aid, special trading arrangements (including duty-free access for virtually all ACP country exports to the EC, except those covered by the CAP), and a system for stabilizing export earnings. The new convention emphasizes the development of specific sectors, particularly agriculture, and the promotion of investment. Pending the entry into force of the new convention, which requires ratification by ten EC member states and two thirds of the ACP member states, transitional arrangements were adopted on February 22, extending some of the provisions of Lomé II. Angola, which had taken part in the negotiation of the convention, became a signatory on April 30. As of December 31, instruments of ratification had been deposited by 31 ACP states and 3 EC members. On July 23 the EC and Pakistan signed a new commercial, economic, and development cooperation agreement replacing a 1976 agreement. The new agreement will result in expanded cooperation, especially in areas of technology and joint research. In November a trade, economic, and development cooperation agreement was signed by the EC, members of the Central American Common Market (CACM),15 and Panama, designed to strengthen regional integration and foster economic and social development in Central America.

Following an initial round of exploratory discussions in November 1984, contacts between the EC and the Cooperation Council16 for the Arab States of the Gulf (GCC) were intensified during 1985. At a ministerial meeting held on October 14 in Luxembourg, the two sides stated that talks on cooperation should progress to a new and more active stage, with a view to the signing of a comprehensive commercial and economic cooperation agreement. A subsequent meeting of the GCC in October focused on ways to coordinate customs and tariffs policies among member states. Participants also discussed the possibility of establishing a unified stock market among GCC member countries, and a subcommittee was established to study problems of intraregional trade.

As a result of its accession to the EC, Portugal withdrew from the European Free Trade Association (EFTA),17 effective December 31. EFTA will continue to accord duty-free access to imports of industrial products from Portugal, but duty-free status will no longer apply to a few nonindustrial products, such as tomato puree and tinned sardines, which were formerly treated as industrial products. Some bilateral agreements between Portugal and EFTA members, which eliminated duties on certain agricultural products, will also be allowed to lapse. As regards Spain’s accession to the EC, EFTA has maintained that Spanish imports from EFTA should be accorded the same treatment during the transitional seven-year period as that country’s imports from the EC. EFTA rejected the EC’s request that EFTA countries grant zero duties on imports of Spanish industrial goods from the date of accession. After having been an associate member of EFTA since 1961, Finland became a full member on January 1, 1986. The change is expected to have little impact on trading patterns, since all tariffs on industrial goods between Finland and EFTA were abolished in 1967.

On November 30 Ireland became the nineteenth member of the Development Aid Committee (DAC) of the OECD. The purpose of the DAC is to encourage growth in development aid and improve its efficiency.

The annual summit meeting of the Economic Community of West African States (Ecowas)18 was held in July 1985, in Lomé, Togo. At the meeting, a decision was taken to delay by one year implementation of phase two of the 1979 Movement of People Protocol concerning the right of residence. The agreement, which was to take effect on July 1, 1985, would have granted residential rights to individuals anywhere in the Ecowas for the next five years. The meeting also adopted a decision establishing an Ecowas travel certificate for member states and a convention for the temporary importation of passenger vehicles into member states. Ecowas member states have stepped up moves to develop a common currency system. The first report of the “study commission on the monetary zone” was presented to Ecowas central bankers in May 1984. The study group is to present its final report to Ecowas heads of state in Lagos in May 1986.

Member countries of the Preferential Trade Area of Eastern and Southern African States (PTA)19 expressed the aim of establishing a common market over the next five years in line with the Lagos Plan of Action. In June 1985 the PTA’s agricultural ministers agreed on an action program for the agricultural sector through 1990. In September the members adopted a ten-point resolution to speed up trade and economic development in eastern and southern Africa. The aim of the resolution is to bring the PTA closer to its main objective of establishing itself as a fully fledged economic commission by 1992. A new PTA trade and development bank for the eastern and southern countries, with headquarters in Bujumbura, Burundi, was scheduled to begin operations in January 1986. The bank’s initial capital is 60 million PTA units of account, two thirds of which is capital subscribed by member states. Financial institutions from member countries will provide financial and technical assistance.

The Twenty-first Annual Assembly of the Board of Governors of the African Development Bank (AfDB)20 and the twelfth meeting of the African Development Fund (ADF) were held in Brazzaville, the People’s Republic of the Congo, on May 8–10. Argentina became a member of the AfDB, and the People’s Republic of China was admitted to the AfDB and the ADF. The AfDB is to act as the depository and administering agency for the emergency relief fund of the Organization of African Unity (OAU), founded in September 1984.

Angola and Tanzania became members of the Organization of Southern African Telecommunications Administration (SATA).21 The nine members agreed to coordinate the use of broadcast frequencies among SATA members.

At the eighteenth Annual Meeting of the Board of Governors of the Asian Development Bank (ADB)22 held in Bangkok, Thailand, on April 30–May 2, the Board of Governors agreed on a fifth replenishment proposal to provide sufficient resources to cover the Bank’s concessional lending for the four-year period 1987-90.

The seventh meeting of economic ministers of the Association of South East Asian Nations (ASEAN)23 was held in Kuala Lumpur, Malaysia, on February 7–9. The ministers initialed an agreement on the recognition of domestic driving licenses in ASEAN countries, with a view to facilitating and increasing intra-ASEAN tourism. As a further step toward improving trade cooperation, the ministers approved the application of 25 percent across-the-board tariff cuts in place of the present 20–25 percent Margins of Preference levels on all items with import values above US$10 million. The ministers also urged the EC and Japan to address market access problems faced by ASEAN exporters.

On July 11–13 foreign ministers of the ASEAN countries met with their counterparts from Australia, Canada, the EC, Japan, New Zealand, and the United States in Kuala Lumpur, Malaysia. At the meeting, the ASEAN ministers expressed concern over tariff and nontariff barriers affecting their exports of manufactured and semimanufactured goods to the developed countries, and over the decline of foreign investment flows to the ASEAN region in recent years. The first ministerial meeting between ASEAN and the EC devoted exclusively to economic affairs took place on October 17–18 in Bangkok. A working committee was established to examine ways to increase investment flows from the EC to ASEAN member countries. A new ASEAN Committee on Energy Cooperation (COEC) was established to deal with energy matters, and the Philippines, Singapore, and Thailand agreed, in principle, to buy oil from their oil producing neighbors—Malaysia, Brunei, and Indonesia—if the export levels of those countries fell below 80 percent of the amount they normally export.

At a January ministerial level meeting of the Indian Ocean Commission,24 a decision was taken to admit the Comoros and France to the organization; France will normally be represented by participants from Réunion.

The reform of the Central American Tariff and Customs Regime, which was signed by Costa Rica, El Salvador, Guatemala, and Nicaragua in December 1984, was ratified by the governments of these countries in 1985 and implemented on January 1, 1986.

During 1985 the Latin American Integration Association25 explored a possible new mechanism for financing interregional trade to counter increased pressures toward bilateralism and countertrade practices among its members; two existing mechanisms for the multilateral settlement of balances among LAIA members had proved ineffective. Under the proposed arrangement, borrowing members would undertake to dismantle administrative trade restrictions and to avoid engaging in bilateralism or countertrade practices.

The Second Meeting of Experts on Capital Goods Industries in Latin America of the Economic Commission for Latin America and the Caribbean (ECLAC)26 was held in Santiago, Chile, on March 4-6. The meeting examined the prospects of regional and interregional cooperation in the field of production and provisioning of equipment for the generation and transmission of electrical energy. A seminar on the Strengthening of Links Between the Federation of Saving and Credit Cooperatives of the Central American Isthmus was organized by the Mexico sub-office of ECLAC, and was held in Mexico City on February 28 and March 1. ECLAC and the Regional Centre for Third World Studies (CRESET) agreed to develop a cooperation program during the visit of the Director of CRESET to ECLAC headquarters on March 11–15. A further meeting of ECLAC was held from April 29 to May 3 to discuss the difficult economic situation faced by most countries of the region, including reconciliation of economic objectives with social ones. The question of indebtedness of the countries in this region was a subject of special attention at a meeting of ECLAC held in Buenos Aires on August 21–23.

During 1985 members of the Caribbean Community (Caricom)27 continued the process of implementing an arrangement reached in July 1984 to establish a common external tariff aimed at reversing the decline in intraregional trade and stimulating the expansion of manufacturing output and trade within the Caricom. The new arrangements include common tariffs on a list of “sensitive” goods from outside the region and a dismantling of protectionist barriers by some members. At the annual meeting of the Caricom held in Bridgetown, Barbados in July, members examined the problem of a downturn in regional economic activity in the face of general global economic expansion. Although no agreement was reached on finding ways to revise the US$100 million Caribbean Multilateral Clearing Facility (CMCF), a major obstacle to progress was removed when Guyana, the main CMCF debtor, agreed on a repayment formula. Guyana is to make some repayments to Barbados, and the proceeds of sugar sales it makes within Caricom will be used to settle its CMCF debts. Guyana is to host the next Caricom summit in July 1986.

Appendix. Summary of Restrictive Measures, 1985
MemberDateDirectionMeasures
Quantitative Import Controls
Industrial countries
Canada1/1/85TighteningBroader coverage of bilateral export restraints.
6/1/85TighteningUnilateral import restraint under MFA (replaced by bilateral agreement with Malaysia in October 1985).
6/11/85LiberalizationGlobal quotas on imports of beef and veal raised.
7/1/85TighteningBroader coverage of agreement with Brazil on clothing imports.
7/3/85. . .Confirmation of understanding with Japan on car imports between April 1985 and March 1986.
9/17/85TighteningBroader coverage of bilateral restraint arrangement with Indonesia.
10/4/85TighteningNew bilateral restraint agreement with Bangladesh.
11/20/85LiberalizationElimination of quotas on certain footware effective 12/1/85 and phasing out of remaining shoe import quotas over the next three years.
France5/30/85TighteningAutomatic issuance of import licenses suspended temporarily for certain items.
9/20/85TighteningQuantitative limits imposed temporarily on various textile imports from Turkey.
Germany, Fed. Rep. of6/14/85LiberalizationRestriction lifted on imports of insulators from Japan.
Ireland1/1/85LiberalizationSpecial restrictions on imports of motor vehicles discontinued.
Italy11/18/85LiberalizationMaximum values of transactions exempt from import and exchange control documentation both doubled. In former case some items exempted.
Japan4/9/85LiberalizationProgram announced to open Japanese markets to certain products.
4/16/85LiberalizationQuota for apple juice imports in first half of fiscal year raised.
7/30/85LiberalizationPlan to increase imports announced, including simplification of certification, and raising of ceilings and quotas under the Generalized System of Preferences (GSP).
12/20/85LiberalizationIntention announced to remove restrictions on refined petroleum products.
New Zealand7/1/85LiberalizationVolume of imports to be licensed in 1985/86 unchanged from preceding licensing year; authorization granted for free transfer of licenses between importers.
9/9/85LiberalizationLicenses issued under tendering system to be increased by 5 percent from 1/1/86. Licenses for certain items to be issued freely from 7/1/86.
9/16/85LiberalizationLicensing system to be phased out by 1988.
United Kingdom1/1/85LiberalizationCertain textile, footwear, and electronic items liberalized.
1/1/85TighteningQuota introduced on certain textile items originating in India.
1/11/85TighteningQuota imposed on certain garments originating in Bangladesh.
3/12/85LiberalizationCertain categories of polythylene film originating in the United States were excluded from restriction.
4/1/85TighteningDual licensing arrangements introduced for iron and steel goods originating in Czechoslovakia.
7/2/85LiberalizationQuotas replaced by surveillance licensing arrangements for certain textile imports from Turkey.
7/9/85LiberalizationBan on imports from Argentina discontinued.
9/25/85TighteningQuotas introduced on imports of certain textiles originating in Turkey.
12/20/85LiberalizationCertain textile items liberalized.
United States1/1/85. . .Release of certain embargoed goods to be gradual, rather than all at once.
1/10/85TighteningAgreed restraint by EC of exports of steel pipes and tubes.
1/28/85TighteningSugar import quota year extended by two months; emergency quotas imposed on certain sugar-containing articles and other products affecting domestic sugar policy.
2/8/85LiberalizationTwo countries added to list of those authorized to sell limited amounts of sugar.
3/1/85LiberalizationRelease of embargoed steel pipes and tubes from EC.
3/1/85LiberalizationU.S. not to seek extension of voluntary restraint on Japanese car exports.
3/5/85NeutralRegulations on rules of origin for textile imports.
4/22/85LiberalizationU.S.-Israel Free Trade Agreement—elimination of all tariffs by 1/1/85 and reductions in nontariff barriers, including licensing procedures.
4/26/85LiberalizationIncrease in import volume of tuna fish subject to tariff-quota.
5/7/85TighteningEmbargo on trade with Nicaragua.
5/14/85TighteningFive-year bilateral agreement with Japan to limit exports of steel and certain steel products.
5/17/85LiberalizationExemption from import quotas of certain products containing sugar.
6/7/85LiberalizationLimited relaxation of agreement with EC on steel imports, for specific project.
6/10/85-6/17/85TighteningAnti-dumping orders issued against certain food imports 6/17/85 from Canada.
8/5/85TighteningAgreement with EC on limits from 8/1/85 for exports of certain steel products previously subject to consultation only.
10/2/85TighteningTighter procedures for imports of certain foodstuffs, for health reasons.
10/3/85TighteningImport of South African krugerrand banned.
11/1/85TighteningAgreement in principle with EC on comprehensive limits on exports of steel products.
11/19/85TighteningBan on Libyan refined petroleum products.
12/30/85TighteningCeiling on imports of semifinished steel from EC.
Developing countries—oil exporters
Algeria1/1/85LiberalizationLimit on imports of equipment raised.
Ecuador2/28/85LiberalizationImport prohibitions on 203 items lifted.
3/15/85TighteningAn import item made subject to prior authorization.
4/18/85TighteningImport items under 40 tariff headings reduced in priority.
5/28/85TighteningCertain import items made subject to prior authorization.
Indonesia1/21/85TighteningLimits imposed on imports of special plastic raw materials.
3/1/85TighteningA brand of pesticide made subject to restrictions.
4/11/85LiberalizationImport invoices from Japan, Hong Kong, Singapore, and Malaysia no longer subject to approval.
Kuwait10/19/85ExtensionProhibition of imports of certain steel pipes extended for two years.
Libya1/25/85. . .Initial provisional allocation of 25 percent of 1984 commodity budget granted to specified entities.
Mexico3/24/85LiberalizationAcceleration announced of program to replace licenses with tariffs: 35–45 percent of imports (in terms of value) to be exempted from permits before end-1985.
7/25/85LiberalizationRequirement of import permits abolished for items representing about one quarter of total imports. Further exemptions introduced later in the year.
Nigeria1/1/85. . .Modification of procedures for licensing and allocating foreign exchange.
10/1/85TighteningImports of maize and rice prohibited.
Syrian Arab Republic9/25/85LiberalizationAuthorization granted for residents to import goods from the lists previously reserved for nonresidents.
Tunisia6/28/85LiberalizationGoods destined for re-export freed from license requirement; formalities simplified for certain imports; increase in limit on personal imports.
7/15/85TighteningAll imports, other than a specified list, made subject to licensing.
7/26/85TighteningInvestment goods for projects approved by investment agencies made subject to prior authorization.
Venezuela7/12/85LiberalizationCertain items removed from restricted lists.
9/2/85LiberalizationCertain items removed from restricted lists.
Developing countries—exporters of manufactures
Hungary1/1/85LiberalizationQuasi-automatic import licensing system (in effect before September 1982) fully restored, replacing system of quotas and individual approvals.
Israel2/5/85LiberalizationSix-month ban on 50 “luxury” items lifted, and replaced by advanced deposit requirement.
Korea7/1/85LiberalizationCertain items liberalized.
Yugoslavia1/1/86Exchange reform entailing reclassification of imports to determine the right to import and access to foreign exchange.
Developing countries—other
Argentina3/28/85LiberalizationCertain goods made eligible for automatic licensing.
5/24/85LiberalizationUrea made eligible for automatic licensing.
6/28/85LiberalizationList of prohibited imports suspended for 30 days.
7/26/85LiberalizationSuspension of prohibited imports extended through 8/31/85.
7/29/85LiberalizationCertain goods made eligible for automatic licensing.
8/27/85LiberalizationSuspension of prohibited imports extended through 12/31/85.
10/11/85LiberalizationAgreement with U.S.S.R. on capital equipment extended to 1988.
Bangladesh7/1/85. . .Two lists of restricted import items introduced, to replace the former system comprising three categories of permitted items. Imports not on the two restricted lists made freely importable through secondary market by registered importers.
BarbadosVarious datesTighteningList of items requiring import licenses expanded.
Bolivia8/29/85LiberalizationAbolition of system of import licensing and allocation of foreign exchange.
10/20/85TighteningImports of sugar temporarily made subject to licensing.
Brazil1/5/85TighteningPrivate importation of cars restricted to authorized dealers on basis of quotas, with certain exceptions.
1/21/85TighteningCertain items made subject to prior approval.
5/17/85TighteningImports of steel products and nonferrous metals made subject to prior approval.
6/9/85LiberalizationNumber of items subject to approval reduced.
FijiVarious datesTighteningImports of roofing materials banned; certain other items made subject to import licensing.
GrenadaVarious datesLiberalizationImportation of a wide range of products was liberalized.
Honduras2/21/85 andTighteningList of items subject to prior approval extended.
India4/12/85LiberalizationList of items importable under open general licenses expanded, in context of trade policy for 1985–88. (A number of changes in classification of particular items for licensing purposes were introduced later in the year.)
Jamaica4/16/85LiberalizationQuotas eliminated; number of items subject to licensing reduced.
Kenya6/13/85LiberalizationReclassification of certain imports for licensing purposes.
Malta9/16/85LiberalizationRestrictions on trade with Italy discontinued.
Morocco2/11/85LiberalizationReclassification of certain imports.
8/7/85LiberalizationExpansion of provision for temporary admission of imports.
Nepal4/20/85NeutralExtension of quota system on imports from India through 1985.
Pakistan7/1/85LiberalizationCertain items removed from prohibited list; ceilings raised for certain imports; restrictions on financing for imports reduced.
Paraguay7/3/85TighteningRegistration of importer at Central Bank, with satisfaction of accounting requirements, made a condition for all private sector imports. Importing firms required to meet minimum capital requirements; also, imports in excess of double the importing firm’s capital required to be backed by a bank guarantee.
Peru1/18/85TighteningLicensing requirements imposed on certain items.
3/27/85TighteningLicensing requirements imposed on certain items.
4/28/85TighteningLicensing requirements imposed on certain items.
5/5/85Trade agreement with Chile replaced by protocols.
6/4/85LiberalizationImport licensing requirements abolished for certain imports from Latin American countries.
6/22/85TighteningLicensing requirements imposed on certain items.
7/29/85TighteningLicensing requirements imposed on certain items.
8/12/85TighteningLicensing requirements imposed on certain items.
Philippines1/25/85LiberalizationCertain imports permitted without central bank approval.
2/4/85LiberalizationCertain imports permitted without central bank approval.
5/31/85LiberalizationCertain deletions from list of banned import items.
6/20/85LiberalizationCertain imports permitted without documentation.
8/14/85LiberalizationCertain imports permitted without official approval.
Rwanda3/12/85TighteningImports of cement prohibited.
9/16/85TighteningCertain imports made subject to prior authorization.
Seychelles2/1/85TighteningAll imports made subject to permits; public monopoly in importation of foodstuffs extended.
Sierra Leone4/25/85LiberalizationImport licenses on certain goods to be issued freely.
Somalia1/1/85LiberalizationImport restrictions eliminated, apart from specific exceptions.
Thailand2/25/85LiberalizationTemporary permission granted for limited imports of palm oil.
3/26/85LiberalizationTemporary permission granted for certain imports.
3/29/85TighteningBan on imports of skimmed milk extended indefinitely.
4/4/85LiberalizationTemporary permission granted for certain imports.
4/10/85LiberalizationTemporary permission granted for certain imports.
4/26/85TighteningCertain imports made subject to licensing for two years.
5/21/85LiberalizationPermission granted for limited import of kenaf.
6/12/85LiberalizationImports of motor cars permitted without license, but subject to 600 percent surcharge.
6/22/85LiberalizationIncrease in permissible imports of milk products and skimmed milk.
Turkey5/17/85LiberalizationReduction in lists of prohibited imports and imports subject to prior permission.
12/26/85LiberalizationList of prohibited items abolished, leaving only certain items prohibited by specific laws; number of items subject to licensing reduced.
Western Samoa9/1/85TighteningMinimum value of imports of capital equipment requiring approval halved.
Zambia3/27/85Separate import licenses introduced for imports from within the Preferential Trade Area of Eastern and Southern Africa.
10/4/85LiberalizationImport licenses to be issued without restriction.
Zimbabwe8/15/85LiberalizationLocal content requirement on textile imports from Botswana reduced.
Import Surcharges and Import Taxation
Industrial countries
Austria1/1/85LiberalizationSixth and seventh stages of Tokyo Round of tariff reductions implemented.
Canada1/1/85. . .Implementation of General Arrangements on Tariffs and Trade (GATT) customs valuation code.
5/1/85TighteningWithdrawal of General Preferential Tariff (GPT) rate for inner tubes.
5/23/85. . .Implementation of a range of “made-not made” tariff provisions as agreed in the Tokyo round.
5/24/85TighteningIncrease in GPT rate on motor vehicle parts from zero to 7 percent.
5/24/85LiberalizationReductions in tariff rates on certain goods and on personal imports.
France9/1/85LiberalizationReduction in duties on imports of alcoholic drink from EC countries.
Germany, Fed. Rep. of1/1/85LiberalizationSeventh stage of Tokyo Round implemented by EC.
Japan3/1/85LiberalizationTariffs on semiconductor products abolished, in concert with the U.S.
4/1/85LiberalizationTariff cuts on certain imports from developing countries advanced by one year or two years; 15 percent duty on certain types of leather rescinded.
7/30/85LiberalizationIntention announced to reduce tariffs and to take steps to improve Generalized System of Preferences for trade with developing countries, including reducing tariff rates.
New Zealand7/1/85MixedChanges in application of GSP.
7/4/85TighteningPreferential tariffs on imports from Brunei and Singapore to be terminated.
Norway3/15/85LiberalizationBroader coverage for GSP.
Sweden1/1/85LiberalizationFinal tariff reductions under Tokyo Round implemented.
United States1/3/85LiberalizationExtension to 1993 of GSP.
2/12/85TighteningIncrease in special import fees on sugar.
2/27/85TighteningAnti-dumping duties imposed on calcium hypochlorite from Japan.
3/1/85LiberalizationImport duties reduced on certain high-technology products.
3/1/85TighteningIncrease in special import fees on sugar.
3/1/85LiberalizationImport fee on raw sugar rescinded.
3/5/85–3/7/85TighteningCountervailing duties imposed on textiles from certain countries.
4/17/85TighteningEligibility for “injury test” in countervailing duty investigations withdrawn from New Zealand.
4/22/85LiberalizationU.S.-Israel Free Trade Area Agreement (in effect from 8/19/85): all tariffs, apart from certain specified products, to be phased out by January 1995.
4/28/85LiberalizationMexico permitted an “injury test” in countervailing duty investigations.
4/29/85LiberalizationElimination of duties on certain aircraft equipment and parts.
5/1/85LiberalizationChanges in GSP program.
6/4/85ExtensionMost favored nation (MFN) treatment extended for one year for Romania, Hungary, and China.
6/21/85TighteningIncrease in duties on pasta products from EC, effective 11/1/85.
7/3/85LiberalizationThirty-two developing countries placed, in a new category exempted from competitive need limits under the GSP.
8/7/85TighteningCountervailing duty laws ruled as being applicable to imports from nonmarket economy countries.
9/3/85LiberalizationRevocation of a countervailing duty order on certain sugar-containing imports from Australia.
9/5/85TighteningCountervailing duty imposed on lamb from New Zealand.
9/23/85TighteningAnti-dumping duties imposed on certain imports from Argentina.
10/25/85TighteningAnti-dumping duties imposed on certain imports from Japan.
11/1/85LiberalizationAgreement with Canada and Japan on mutual elimination of duties on certain computer parts.
11/20/85TighteningAnti-dumping duties imposed on certain goods from New Zealand.
11/22/85LiberalizationAgreement that United States, Canada, and Japan would eliminate tariffs on computer parts.
11/27/85TighteningAnti-dumping duties imposed on certain goods from Hong Kong and Korea.
11/29/85TighteningCountervailing duties imposed on certain goods from Peru.
Developing countries—oil exporters
Indonesia3/4/85LiberalizationGovernment signed GATT Code on Subsidies and Countervailing Duties.
4/1/85MixedNew tariff schedule, linked to introduction of value-added tax.
Kuwait4/3/85TighteningCustoms duties imposed on certain items.
6/11/85LiberalizationCertain items exempted from import duty.
6/17/85ExtensionCustoms duties on certain items extended for one year.
7/28/85TighteningCustoms duty levied on certain materials.
8/12/85LiberalizationRule introduced under which tariff protection would be authorized only for firms with value added in excess of 40 percent.
9/23/85TighteningCustoms duties imposed on certain items for three years.
12/22/85TighteningCustoms duties imposed on certain items.
Mexico7/25/85LiberalizationNew tariff structure introduced.
Saudi Arabia3/22/85TighteningIncrease in minimum tariff on dutiable imports from 4 percent to 7 percent.
7/22/85TighteningIncrease in duty on poultry from 10 percent to 20 percent.
Trinidad and Tobago1/1/85TighteningStamp duty of 18 percent imposed on all imports other than food and drugs.
Tunisia4/25/85LiberalizationExemption from duty for certain imports.
Developing countries—exporters of manufactures
Israel4/1/85ExtensionImport levy of 2 percent extended for 1 year, to 3/31/86.
8/19/85LiberalizationFree Trade Agreement with United States signed: all tariffs, apart from certain specified products, to be phased out by January 1995.
Korea7/1/85LiberalizationCertain items removed from the “elastic” tariff rate list, and certain newly liberalized items added.
Yugoslavia10/1/85TighteningTax-equalization charge on dutiable imports raised from 6 percent to 7 percent.
Developing countries—other
Argentina6/11/85TighteningImport tariffs raised by 10 percentage points.
8/30/85LiberalizationIndustrial imports from Uruguay freed of tariffs and other taxes.
9/30/85LiberalizationPreferential tariff treatment granted for certain chemical imports from certain Latin American countries.
10/11/85TighteningMinimum prices established for wine imports from the EC.
10/14/85LiberalizationTariff on cotton temporarily reduced to zero.
10/17/85LiberalizationPreferential tariff treatment granted for certain medical products from certain Latin American countries.
10/30/85TighteningTariff on certain meat products raised 10 percentage points.
11/12/85LiberalizationPreferential tariff treatment granted to LAIA countries for certain goods.
Belize3/30/85TighteningIncreases in stamp duty rate from 8 percent to 10 percent and in customs administration fee on entrepot trade from 2 percent to 3 percent.
Bolivia8/29/85LiberalizationChanges in tariff structure.
Brazil1/28/85LiberalizationCertain items exempted from import duties.
2/25/85LiberalizationCertain items exempted from import duties.
8/26/85LiberalizationCertain items exempted from import duties.
Chile2/27/85LiberalizationUniform tariff reduced from 35 percent to 30 percent.
6/24/85LiberalizationUniform tariff reduced from 30 percent to 20 percent.
Dominica9/1/85MixedIn conformity with a Caricom agreement, common external tariffs were raised on certain items, while the tariff rates on certain regional products were reduced by 50 percent.
Guinea4/17/85LiberalizationTariffs, surcharges, and import taxes on certain goods eliminated or reduced by 50 percent.
Haiti1/17/85TighteningSurcharge of 1 percent imposed on all imports.
India4/12/85LiberalizationRationalization of tariff rates on selected items of capital equipment, materials and components; while some rates were increased, net impact was a reduction in the overall level of tariffs.
Jamaica4/13/85TighteningStamp duty of 6–10 percent applicable to certain imports raised by 10–30 percentage points, with certain exceptions.
Kenya6/13/85LiberalizationLower tariff rates for industrial inputs, capital goods, and unassembled motor cars.
Liberia2/1/85TighteningSurcharge of 10 percent imposed on all dutiable imports from non-dollar areas.
5/1/85TighteningSurcharge imposed on 2/1/85 replaced by an increase of 10 percentage points on all import duties.
Mauritius1/31/85TighteningIncrease in rate of stamp duty from 12 percent to 17 percent.
Morocco1/1/85LiberalizationReduction in special tax on imports from 10 percent to 7.5 percent.
Paraguay1/4/85TighteningTariff of 10 percent levied on imports from neighboring countries; list of goods exempted from tariff specified.
Peru1/8/85LiberalizationImport duty reduced on specified chemical products.
1/11/85LiberalizationTariffs on imports for the publishing and mass-media industry eliminated for eight years.
1/29/85TighteningTariffs raised by up to 13 percent.
2/22/85LiberalizationEquipment for small mining enterprises exempted from duties.
5/5/85TighteningImport surcharge raised by 2 percentage points through 1985.
5/10/85LiberalizationList of duty exemptions for the publishing industry expanded.
6/18/85LiberalizationIntermediate inputs and capital equipment for production of paper and paper products exempted from duties for eight years.
6/20/85LiberalizationCoal-fueled energy-generating equipment exempted from duties.
7/21/85LiberalizationCountry coverage of LAIA duty rebates broadened.
7/30/85LiberalizationTariff rates on LAIA imports reduced by 3–7 percent.
Philippines11/7/85LiberalizationCertain import duties removed.
St. Vincent and the Grenadines7/31/85MixedChanges in tariff structure, in compliance with Caricom agreement.
South Africa9/23/85TighteningSurcharge of 10 percent imposed on all imports not bound by GATT rules or from EC. (Affecting about 55 percent of imports.)
Thailand1/17/85TighteningSurcharge of 10 percent on certain imports.
4/5/85MixedRevision of structure of duties.
4/24/85TighteningSurcharges imposed on certain imports.
6/12/85TighteningSurcharge of 600 percent imposed on certain motor cars, with license requirements removed.
10/30/85LiberalizationImport duty on cotton reduced.
Togo8/23/85TighteningTax of 5 percent levied on soap imports.
Turkey1/1/85HarmonizationProduction tax on imports replaced by value-added tax.
5/17/85LiberalizationList of imports subject to special levy expanded to include a number of items formerly subject to prior authorization.
Uruguay6/13/85TighteningSurcharge rates raised uniformly by 5 percentage points until end-1986.
9/2/85LiberalizationList of tariff-free Argentinian imports expanded.
10/15/85MixedNew terms introduced for system of reciprocal preferences under LAIA.
Vanuatu8/10/85LiberalizationDuty-free scheme established for tourists, purchases of certain imported goods.
12/30/85TighteningCustoms service tax on most imports raised from 3 percent to 5 percent.
12/30/85TighteningExemption of government imports from import duties and customs service tax withdrawn.
Zaire4/20/85TighteningDuties increased on certain products.
Advance Import Deposits
Developing countries—oil exporters
Ecuador3/28/85LiberalizationAdvance deposit requirement for imports eliminated.
Syrian Arab Republic5/27/85LiberalizationImporters waiting to open letters of credit since November 1984 authorized to make advance deposits of 50 percent.
9/25/85MixedAdvance deposit requirements unified at 50 percent, from previous rates of 25 percent, 50 percent, and 70 percent.
Developing countries—exporters of manufactures
Israel2/5/85LiberalizationThe advance deposit requirement of 15 percent imposed on a range of imports eliminated, while the requirement on “luxury goods” reduced by 15 percent, with the cuts of 3 percent per month to continue.
Developing countries—other
Argentina3/25/85LiberalizationCertain imports from Uruguay exempted.
4/9/85LiberalizationFishing and factory ships exempted.
Dominican Republic3/22/85LiberalizationDeposit requirement reduced from 100 percent to 50 percent for certain imports.
Egypt1/3/85LiberalizationDeposit requirements reduced from 25–100 percent to 15–50 percent and made payable in domestic currency.
El Salvador6/12/85LiberalizationThe exchange restriction aspect of the advance deposit requirement on certain import payments was abolished.
Greece10/14/85TighteningTemporary six-month advance import deposit scheme introduced, with required deposits amounting to 40–80 percent of value of specified imports other than raw materials.
Pakistan3/3/85LiberalizationCars for disabled persons exempted.
Turkey4/1/85LiberalizationRates of guarantee deposit reduced by 25 percent.
8/1/85LiberalizationRates of guarantee deposit reduced by 25 percent.
12/1/85LiberalizationRates of guarantee deposit reduced by 25 percent.
12/26/85LiberalizationRates of guarantee deposits reduced to 3 percent and 1 percent.
Western Samoa9/1/85TighteningAdvance deposit requirement introduced for opening of letters of credit for imports of motor vehicles.
Zaire6/21/85LiberalizationObligatory prior deposit in connection with opening of uncovered letters of credit, reduced in March 1985 from 50 percent to 25 percent, was eliminated.
Other Import Measures
Industrial countries
France3/2/85LiberalizationAuthorization granted for importers to purchase foreign exchange forward up to six months for goods invoiced in ECUs.
Italy10/23/85TighteningMinimum value of transactions requiring foreign currency financing for advance payments doubled.
United States3/11/85

3/12/85
Liberalization

Elimination of requirement for Special Customs Invoice.

Revision of inspection standards for pork.
Developing countries—oil exporters
Ecuador3/15/85TighteningProhibition of advance sales of foreign currency at the official rate by central bank other than for medical products.
Indonesia7/15/85LiberalizationTrade relations with China normalized.
Syrian Arab Republic1/15/85LiberalizationIntroduction of additional list of products importable by nonresident Syrians by means of drawing on their nonresident foreign currency accounts.
7/3/85LiberalizationCertain private sector establishments authorized to finance certain imports by special arrangement.
7/9/85LiberalizationAs on 1/15/85.
8/13/85LiberalizationAuthorization granted for imports of certain agricultural products and equipment under 180-day credit arrangement.
VenezuelaVarious datesLiberalizationPeriodic transfers approved of certain items from list dates eligible for financing at preferential exchange rate.
Developing countries—exporters of manufactures
Israel4/4/85LiberalizationRequirement (imposed July 1984) that noncommercial vehicle imports be financed with foreign credit abolished.
8/1/85ExtensionSuspension of foreign exchange sales for import prepayment (with certain exceptions) extended for one year.
Yugoslavia12/6/85. . .System of official allocation of foreign exchange reformed.
Developing countries—other
Argentina1/2/85. . .Reciprocal credit agreement with Poland covering specified exports.
1/11/85LiberalizationCertain goods originating in Chile exempted from minimum financing requirements; payments permitted to be settled against shipping documents or on credit.
6/6/85LiberalizationAs in entry for 1/11/85, for goods originating in Paraguay.
7/26/85LiberalizationAnnounced that term of import finance would be automatically extended when payment not made by originally agreed maturity date.
10/15/85LiberalizationAs in entry for 1/11/85, for goods originating in Ecuador.
Costa Rica5/20/85TighteningRegulation introduced requiring all trade with Central American countries to be settled in U.S. dollars.
Cyprus2/9/85LiberalizationIncrease in limit on advance payments for imports.
Dominican Republic1/23/85. . .Procedures and conditions announced for settlement of letters of credit approved before 4/17/84.
Egypt1/3/85TighteningImport Accounts abolished and replaced by Free Accounts; Free Accounts no longer to be used for import payments (“own exchange” system of financing private imports abolished); restrictions introduced on use of Foreign Exchange Retention Accounts.
1/23/85LiberalizationAuthorization for temporary use of Free Accounts and Import Accounts for import payments.
4/6/85LiberalizationAuthorization granted for imports financed by foreign exchange from Free Accounts.
4/6/85LiberalizationIn a specification of the sources and uses of funds transacted at the premium exchange rate, imports covered under the foreign exchange budget (other than those applied to the Central Bank pool) were included among the uses of funds to be financed by the “premium pool.”
El Salvador6/17/85LiberalizationProportion of imports of intermediate goods required to be financed at the parallel market rate raised from 50 percent to 100 percent.
Guatemala2/21/85LiberalizationAccess to auction market granted for specified imports up to specified proportions.
7/1/85TighteningTax of 3.5 percent imposed on foreign exchange operations for imports (and certain other transactions) with exemptions for international institutions, diplomatic missions, the public sector, and petroleum companies.
7/2/85LiberalizationForeign exchange settlement for certain items to be effected through banking market rather than official market.
9/13/85LiberalizationAccess to official market granted for specified imports.
9/7/85LiberalizationAccess to auction market granted for specified imports.
10/1/85LiberalizationAccess to official market granted for specified imports.
Honduras11/20/85LiberalizationExporters of meat authorized to retain up to 25 percent of their foreign exchange proceeds to finance imports.
Maldives2/10/85LiberalizationAbolition of regulation requiring all imports to be made on a letter of credit basis.
Nepal1/9/85LiberalizationReduction in margin deposit requirement for opening of import letters of credit by certain enterprises, for certain imports.
3/15/85MixedUniform insurance fees established on all imports from third countries transported through India.
3/22/85. . .Extension of Indo-Nepal transit treaty for six months.
6/11/85TighteningIncrease in regulated interest rate on import financing loans; increase in margin deposit requirements on letters of credit for imports of luxuries.
7/15/85TighteningReductions in duty-free allowances for Nepalese travellers.
Nicaragua2/8/85LiberalizationChanges in exchange rates applying to different types of imports.
4/15/85LiberalizationImports of petroleum products made eligible for financing at principal official exchange rate.
5/20/85LiberalizationAnnounced that foreign exchange for payment of imports not eligible in the official exchange market could be purchased in a newly authorized “free” exchange market.
2/1/86LiberalizationNew principal official exchange rate introduced and made applicable to all imports other than petroleum products, to which the former rate continued to be applied.
Pakistan7/13/85LiberalizationAuthorized dealers permitted to sell foreign exchange forward for imports by certain public sector units.
Philippines2/18/85LiberalizationMinimum payment terms reduced under open accounts and documents against acceptance arrangements.
5/9/85LiberalizationCertain producers exempted from regulation specifying that certain import obligations be settled only to the extent of net export proceeds.
5/22/85LiberalizationAuthorized banks permitted to sell foreign exchange for specified imports without central bank approval.
7/16/85LiberalizationCertain imports construed to be in compliance with the financing requirements of an earlier circular.
8/2/85Guidelines set governing the settlement of outstanding trade credits and drawings under the Revolving Short-Term Facility Agreement.
9/6/85LiberalizationComputer products exempted from financing requirement of an earlier circular.
9/9/85LiberalizationMinimum repayment terms reduced under open accounts and documents against acceptance arrangements for oil companies.
Somalia1/1/85TighteningImporters required to process documents through domestic banking system.
1/24/85LiberalizationLimited authorization given for private sector import and distribution of petroleum products.
South Africa10/4/85TighteningStandstill arrangement introduced in respect of certain debt repayments also applied to payments for imports received before 1985.
Sudan2/12/85TighteningFinancing of imports in interbank foreign exchange market restricted to use of banks’ own resources and customers’ foreign currency accounts. Financing from foreign exchange cash of unknown origin prohibited.
Thailand4/22/85LiberalizationRelaxation of regulations on opening of letters of credit for imports.
Western Samoa9/1/85TighteningMinimum import payment for which letters of credit were obligatory halved; increase in interest rate on credit for import finance.
Yemen Arab Republic2/11/85TighteningIncrease from 10 percent to 15 percent in proportion of commercial banks’ foreign exchange purchases to be used to finance officially specified imports. Also, commercial banks prohibited from opening letters of credit in foreign currency.
4/20/85LiberalizationSubject to Central Bank approval, importers authorized to use up to 50 percent of their foreign currency deposits to finance specified imports.
Zambia1/16/85TighteningRequirement introduced that air freight charges on own-financed imports be paid in foreign currency.
State Trading
Developing countries
The Gambia7/3/85LiberalizationThe monopoly of The Gambia Produce Marketing Board over its importation discontinued. Retail price of rice decontrolled.
Guinea1/1/85TighteningAuthorization to mine gold and diamonds limited to government and mixed-economy companies.
Haiti1/21/85LiberalizationState tobacco monopoly abolished; administration of the taxes formerly collected by this agency passed on to the Internal Revenue Administration.
Hungary1/1/85LiberalizationRight to engage in foreign trade granted to 32 additional enterprises. Nine additional enterprises granted same right during the rest of the year.
India4/12/85LiberalizationImport monopoly by public agencies over certain products removed.
10/16/85TighteningExports of wheat seed and paddy seeds (certified) to be canalized through National Seeds Corporation Ltd.
Sierra Leone12/17/85TighteningThe Government established the Government Gold and Diamond Office (GGDO), with authority to buy, examine, assort, value, parcel, market, and export gold and diamonds.
Togo8/13/85TighteningThe import monopoly of Société Nationale de Commerce (Sonacom) extended to include rice and sugar in sachets.
Zaire3/1/85TighteningA new national trading corporation, Sonatrad, established to improve purchasing terms and procedures for inputs and materials imported by the five major public enterprises.
6/5/85LiberalizationImportation of petroleum products liberalized. New companies will be allowed to enter the market for petroleum products under specified conditions.
Exports and Export Proceeds
Quantitative Restrictions and Controls on Exports
Industrial countries
Japan3/14/85TighteningLimits set on exports of steel products and fabricated steel structures to the United States during the period 10/1/84 to 10/31/89.
3/31/85LiberalizationHigher limit set on exports of cars to the United States over the period April 1985 to March 1986.
12/10/85TighteningLower limits set on exports of video cassette recorders to the EC.
United Kingdom7/8/85LiberalizationBan on exports to Argentina lifted.
United States1/1/85TighteningTightened restrictions on export of more sophisticated computer technology and eased export controls on the sale of less sophisticated personal computers to the U.S.S.R. and its allies in the Warsaw Pact. Export controls tightened by requiring COCOM’s review of computer software in addition to computer hardware.
2/26/85TighteningCessation of all blended credit export shipments.
4/24/85LiberalizationEased export controls on software and computers, with some destinations excepted.
6/14/85LiberalizationBan of exports of United States oil to Canada lifted.
8/19/85TighteningExport controls imposed on underwater photographic camera and equipment.
9/5/85TighteningTighter controls on re-export of refined sugar.
12/17/85LiberalizationEased controls on exports to China.
Developing countries
Argentina8/20/85TighteningExports of cotton suspended temporarily.
8/27/85LiberalizationTemporary suspension of cotton exports lifted for certain grades of cotton.
9/12/85TighteningExports of unfinished or semifinished cotton suspended.
Brazil3/29/85TighteningQuantitative limits imposed on exports of steel products to the United States through 9/30/89.
7/25/85TighteningQuantitative limits established on exports of sisal fiber to the United States and Canada for the period August 1985 to July 1986
Ecuador3/6/85TighteningA list of prohibited exports was issued.
India4/16/85LiberalizationAuthorization granted for exports of wheat and wheat products within specified levels on first-come, first-served basis, and in conformity with given minimum export prices.
5/13/85LiberalizationExport of psyllium seed, hash, and powder allowed under OGL-3 against registration of contents with the Basic Chemicals Pharmaceutical and Cosmetic Export Promotion Council subject to minimum export prices.
6/7/85LiberalizationExport of textile cloth (and materials thereof) of olive green shade authorized within a specified limit.
8/19/85TighteningExports of human skeletons and parts thereof prohibited.
8/20/85LiberalizationExport of meat-cum-bone meal allowed under OGL without conditions.
9/6/85LiberalizationExports of hand-knotted, woven, and woolen carpets of Persian or Mubarik designs above 32,0000 knots per sq. meter allowed under OGL-3, to all countries except those having common land frontier with India, on certain conditions.
9/24/85LiberalizationExports of colored magnesite of certain specifications allowed on first-come, first-served basis, within specified limits while other colored magnesite products freely allowed or licensed freely.
10/16/85LiberalizationExports of wheat straw (hay) allowed on a first-come, first-served basis within specified quantitative limits.
Kuwait6/25/85LiberalizationExports of frozen fish and shrimp allowed.
Nepal8/17/86LiberalizationExports of “tossa” variety of jute authorized without quantitative restrictions during the fiscal year.
10/7/85LiberalizationExports of “sada” (ordinary) variety of jute similarly authorized without restriction.
Peru4/18/85TighteningExports of sugar syrup restricted.
5/9/85TighteningCommittee established to administer export quotas among producers.
6/11/85TighteningExports of fish oil prohibited.
6/25/85LiberalizationAuthorization to export fish oil restored but subject to licensing.
7/13/85Traditional exports defined to include items classified under 48 tariff positions.
South Africa9/11/85TighteningUnder a bilateral export restraint agreement with the United States, exports of certain textile products and clothing items to the United States were placed under export control, to remain in force for three consecutive calendar years ending 8/31/88.
Thailand1/15/85TighteningExports of petroleum on concession basis, except condensate natural gas, prohibited for one year.
6/29/85LiberalizationExports of longon authorized, subject to a minimum export price.
8/31/85LiberalizationProhibition on exports of jute and kenaf lifted.
Togo1/1/85TighteningExports of live birds temporarily suspended.
11/8/85TighteningExport quotas imposed on tapioca products. Quota to the EC for 1986 was reduced compared to that for 1985.
Tunisia1/31/85LiberalizationExporters receiving immediate payment or selling on credit terms of less than 40 days and holding insurance policy with “COTUNACE” exempted from authorization.
5/14/85LiberalizationA number of items removed from the list of prohibited exports.
Export Licensing
Industrial countries
France3/18/85LiberalizationLicensing requirements for exports of amplifiers for television sets for non-military use and for export of printing devices (subject to specified regulations) abolished.
United States4/24/85LiberalizationSimplified the distribution license program.
4/29/85TighteningImposed licensing requirements on exports and re-export of certain helicopters to all destinations for 90 days.
5/1/85TighteningLicensing requirements introduced on exports to Nicaragua.
7/13/85MixedThe Export Administration Act signed. It relaxed export licensing rules for U.S. companies doing business with U.S. allies in NATO and Japan and introduced some constraints on the President’s power to impose export embargoes for foreign policy purposes.
Developing countries
Ecuador4/30/85LiberalizationTemporary export licenses were made valid for 90 days.
India4/12/85LiberalizationExport licensing policy for next three-year period announced: (a) exports to Pakistan awarded same treatment as exports to other permissible destinations; (b) exports of silk wastes, other than nonmulberry silk waste, considered ornaments; but exports of nonmulberry silk waste not allowed; (c) exports of acetone, phenoe, acetic anhydride, monochloro-acetic acid, camels for breeding purposes, certain equine breeds (brought under export trade control), allowed on merit; (d) exports of rayon filament yarn and wollastonite allowed within a specified quantitative limit; (e) exports of sodium chloride and sandalwood chips of irregular shape and size only allowed under OGL-3; (f) exports of certain equine breeds, manufactured products of some animal skins, paddy, seeds of all oilseeds and pulses, and charcoal of all types other than activated charcoal/activated carbon not permitted; (g) minimum export prices for table and hatching eggs, roasted grain (whole), and Basmati rice raised; and (h) minimum export price for woolen knitwear reduced.
Peru6/28/85LiberalizationAuthorization to export fish oil restored but subject to licensing.
Somalia1/1/85LiberalizationExisting controls on exports, including licensing requirements, abolished with exception of specified items made subject to prior approval.
Suriname7/18/85TighteningA special permit required for presents to be sent abroad. Gifts worth up to Sf 50 consisting of specified domestic products exempt if taken abroad by residents travelling abroad or by foreign tourists; in the latter case, proof of purchase and of exchange of foreign currency is required.
Thailand4/2/85TighteningExports of all types of kenaf except kenaf waste or products made subject to licensing.
Western Samoa8/5/85LiberalizationMinimum value of exports requiring certificates validated by banks increased from US$200 to US$250.
Fiscal and Other Incentives
Industrial countries
New Zealand4/1/85LiberalizationSubsidy under Export Performance Taxation Incentive reduced by 50 percent.
United States5/15/85TighteningSubsidies granted to agricultural exports targeted to specific markets.
Developing countries
Argentina1/25/85TighteningIncome tax credit of 10 percent of export value for a list of export goods. Exporters of finished goods qualify for tax “drawback” to be used as rebates of duties of imported inputs and other taxes.

Exporters of promoted goods exempted from stamp duty.
1/25/85TighteningSmall- and medium-size firms joining consortia to receive incentive of 4 percent of f.o.b. value of exports over five years (annual incentive not to exceed 80 percent of operating expenses) and to qualify for export financing.
1/30/85LiberalizationExport rebates of up to 10 percent constituted for certain products.
2/7/85TighteningSpecial export rebate for exports to new markets to include additional products to a number of countries for one year.
3/15/85TighteningExport rebate of 10 percent of export value for export of “turnkey” projects, subject to requirements of minimum content of national origin. Export compensation adjustment established for variations in real price of exports, including changes in export taxes and rebates that might occur between the dates exports contracted and shipped.
3/29/85LiberalizationExport rebate of 4 percent provided for meat exports previously subject to 6 percent tax.
4/22/85TighteningExport rebates for some steel products raised from 4 percent to 10 percent, except for those destined to the United States and the EC.
5/20/85TighteningExport consortia and cooperatives eligible for incentives equal to 4 percent of f.o.b. value of exports, subject to limit of 80 percent of operating revenues.
6/11/85LiberalizationExport rebates eliminated for products with existing rebates of up to 10 percent, while export taxes of 4 percent, 5 percent, and 6 percent imposed on products with existing rebates of 6 percent, 5 percent, and 4 percent, respectively.
8/29/85LiberalizationExceptions from the special rebate for exports of certain steel products to the United States and the EC eliminated.
10/17/85TighteningExport rebate of 10 percent introduced through 12/31/85 for a large number of steel products; if these products destined for the United States and the EC, rebate set at 4 percent.
Bangladesh7/1/85LiberalizationDrawback on duty paid in excess of 2.5 percent on imports of spare parts by export-oriented industries authorized.
Chile12/17/85TighteningExports of specified export products given the option on a retroactive basis of a subsidy equal to 10 percent of the net value of sales in lieu of benefits under the import duty drawback scheme.
Costa Rica9/19/85TighteningRate of tax credit certificate (CATs) changed from a uniform 15 percent of the f.o.b. value of exports, to 15 percent for export to the United States and Puerto Rico, and 20 percent for exports to other destinations outside Central America.
Hungary1/1/85TighteningRate of rebate of indirect taxes settled in convertible currencies raised from 2 percent to 7 percent of value.
8/1/85TighteningCeiling on permissible rate of export subsidy for agricultural exports raised from 8 percent to 28 percent.
India5/15/85. . .Minimum export price of basmati rice raised.
6/15/85LiberalizationDuty drawback rates for 800 items increased to provide greater export incentives.
8/16/85. . .Floor price for coir and coir products raised.
Mexico4/8/85TighteningProgram for Integral Promotion of Exports (Profiex) came into operation and temporary import programs for exports were established.
4/23/85TighteningMexico and the United States concluded a three-year understanding in the case of export subsidies and countervailing duties.
4/24/85TighteningGeneralized export drawback system established, under which taxes paid on imported inputs and in production of exports to be reimbursed.
Nepal11/30/85LiberalizationThe cash subsidy scheme for exports was withdrawn.
Pakistan4/15/85TighteningCompensatory export rebate system extended and applicable rebate rates increased in a number of cases.
Peru4/26/85TighteningExport compensation rates increased to 25 percent for poultry, bricks, and tiles.
6/4/85TighteningExport compensation rates increased 1 percent for enterprises commercializing nontraditional exports.
8/12/85TighteningTax credit certificate rate increased to 35 percent for exports of handicrafts.
Thailand3/29/85TighteningExport premium on rice and rice products extended three months to 6/30/85.
6/21/85TighteningExport premium on rice and rice products extended until 10/31/85.
9/24/85TighteningExport bonus ratio for the export of tapioca products to non-EC as well as EC countries was changed from 1:1 to 1.25:1.
Turkey1/1/85LiberalizationGeneral rate of export tax rebate reduced from 20 percent to 11 percent, and the special rate from 10 percent to 6 percent.
Uruguay12/20/85TighteningTax credit certificates for exporters of fish products, amounting to 3 percent, 6 percent, or 11 percent of the f.o.b. value of exports to be used to discharge domestic tax liabilities, pay social security contributions, or sold to a third party.
Export Taxation
Developing countries
Argentina1/30/85LiberalizationFor fishing sector, some export taxes reduced to zero.
1/31/85LiberalizationExport taxes for tobacco lowered from 31 percent to 15 percent.
2/4/85LiberalizationExport taxes on main agricultural products reduced on average by around 6 percentage points.
3/29/85LiberalizationExport taxes on certain meat and meat products reduced.
5/15/85LiberalizationExport tax on soybeans reduced from 25 percent to 23 percent.
5/28/85TighteningReduction of export tax on soybeans rescinded, tax rate of 25 percent restored.
6/11/85TighteningExport taxes increased by 7–10 percentage points.
8/5/85LiberalizationExport taxes for many industrial products reduced by up to 18.5 percentage points.
9/27/85LiberalizationExport taxes on tea products lowered by 10 percent to 15 percent.
9/30/85LiberalizationExport taxes for wool products reduced by 3.5–4 percentage points.
10/4/85LiberalizationExport tax on wheat lowered from 26.5 percent to 15 percent.
10/17/85LiberalizationExport tax on linseed oil reduced from 31 percent to 21 percent.
11/1/85LiberalizationExport taxes on linseed oil and other linseed products reduced by 3—4 percent.
Brazil5/6/85MixedExport taxes on a number of items were reduced from 11–27 percent to 0.6–9.8 percent and extended indefinitely.
5/6/85TighteningExport tax of 3.51 percent imposed on exports of concentrated juice to the United States.
7/12/85TighteningExport taxes of 5.63 percent imposed on exports of certain types of motors to Canada.
8/16/85TighteningPayment period for export tax on coffee reduced.
10/15/85LiberalizationExport taxes on certain steel products exported to the United States eliminated.
Dominican Republic1/23/85TighteningA 36 percent surcharge on exports of traditional products and services and a 5 percent surcharge on exports of nontraditional products and certain services imposed, to be collected off the local-currency counterpart of export proceeds to establish an exchange stabilization fund. Receipts from tourism and Dominicans living abroad not affected.
3/22/85LiberalizationThe surcharge applicable to exchange proceeds from industrial free zones was reduced from 36 percent to 5 percent.
India4/12/85LiberalizationExport duties abolished on 12 items.
IndonesiaVarious datesLiberalizationExport tax and additional export tax on coconut oil, palm kernel, raw stearin of palm oil, and refined, bleached, and deodorized stearin eliminated.
Malawi3/22/85TighteningExport tax of 10 percent levied on tea and tobacco.
Thailand4/5/85LiberalizationExport taxes reduced by 20 percent on six types of para-rubber; wood products exempted from export duty.
9/25/85LiberalizationExport tax on rice abolished.
Special Credit Policies
Industrial countries
France10/8/85LiberalizationBanks authorized to grant export credits in French francs to nonresident purchasers of French goods and services, without guarantee from COFACE.
10/8/85LiberalizationLimit of 180-day payment period to nonresident customers, in the absence of a COFACE guarantee or special authorization from customs, abolished.
Italy1/12/85LiberalizationForeign currency financing requirement for exports on deferred payment basis lowered from 50 percent to 25 percent.
10/23/85LiberalizationForeign currency export financing requirement abolished.
New Zealand3/31/85LiberalizationNumber of export suspensory loan schemes terminated.
Developing countries
Argentina1/2/85TighteningReciprocal credit agreement with Poland signed.
1/24/85TighteningTechnical services to export of “turnkey” plants eligible for 80 percent of value, one-year prefinancing. Prefinancing for exports of consumer goods, inputs, and foodstuffs raised to 65 percent of export value.
1/31/85TighteningSpecial refinancing regime for meat-packing firms exporting more than 30 percent of output extended through 3/27/85.
2/26/85TighteningCentral Bank credit line financing exports to China renewed through 12/4/86.
3/11/85TighteningOpening of a Central Bank credit line to finance exports to Guyana for two years.
4/12/85TighteningSpecial refinancing scheme for meat packing firms extended through 6/28/85.
5/3/85TighteningCentral Bank to provide loans from the Export Promotion Fund at 7 percent.
5/15/85TighteningRediscount facility for commercial banks for prefinancing of exports established at the Central Bank.
6/4/85TighteningRenewal of Central Bank credit line to exports to Senegal through 6/30/85.
6/14/85TighteningOpening of a Central Bank Credit line to finance certain exports to Panama for two years.
6/28/85LiberalizationMaximum terms for prepayment and foreign currency export prefinance for grains and main agricultural products shortened from 180 days to 30 days; for most other exports the maximum term set at 360 days. Regulations concerning countertrade issued.
7/19/85TighteningMaximum permissible terms for prepayment and foreign currency export prefinance for grains and principal agricultural products lengthened from 30 days to 90 or 120 days.
7/20/85LiberalizationMaximum permissible terms for prepayment or foreign currency export prefinance shortened from 360 days to 180 days.
8/1/85TighteningFinancing system for exports to new markets extended to include various meat exports; financing available up to 80 percent of f.o.b. value, for up to 180 days.
8/26/85TighteningCentral Bank credit lines to finance exports to Uruguay extended through 6/4/86; interest rate lowered from 7.5 percent to 6.5 percent.
9/30/85TighteningCentral Bank credit line to finance exports to El Salvador renewed through 3/16/86.
10/11/85TighteningCentral Bank credit line to finance exports to Costa Rica renewed through 5/17/86 and interest rate lowered from 7.5 percent to 6.5 percent. Central Bank credit line to finance exports to Honduras renewed through 4/12/87.
Argentina10/14/85TighteningCentral Bank credit line to finance exports to Bolivia increased, extended through 3/18/86 and interest rate lowered from 7.5 percent to 6.5 percent.
11/8/85TighteningInterest rate on credit lines to promote exports reduced from 7.5 percent to 6.5 percent.
11/11/85TighteningOpening of credit lines to finance exports to Benin and Central African Republic for two years.
Brazil5/2/85TighteningInterest rate on export prefinancing credits lowered by 5 percentage points.
Israel7/1/85. . .Directed credit for exports to be denominated entirely in U.S. dollars, at LIBOR plus 2 percentage points.
Turkey1/1/85LiberalizationSystem of preferential credits for specified export items abolished.

Export or Exchange Guarantees
Industrial countries
Switzerland3/18/85LiberalizationFederal Export Risk Guarantee premia raised by about 45 percent. Foreign exchange risk coverage suspended indefinitely.
United Kingdom5/14/85TighteningNew scheme for provision of export insurance for exports to smallest countries launched.
Developing countries
Israel7/1/85LiberalizationLiability under the exchange rate insurance scheme limited to 11 percent of value added in industrial exports.
Repatriation and Surrender of Export Proceeds and Surrender Requirements
Industrial countries
Iceland8/1/85LiberalizationThe surrender period for export proceeds extended to 180 days from shipment. Authorization granted for banks to open accounts in the major foreign currencies for resident exporters of goods and services.
Developing countries
Bangladesh7/1/85LiberalizationExports of some 51 items (mainly nontraditional) made eligible for full conversion at the secondary market. Proceeds from raw jute, loose tea, and wet blue leather to be converted at the official exchange rate; all other export proceeds to be converted 40 percent or 70 percent at the secondary market rate, depending on the domestic value added.
12/1/85LiberalizationProportion of foreign exchange receipts eligible for conversion through secondary foreign exchange market increased for twine, yarn, hessian, and sacking exports. Commissions received by agents of foreign suppliers eligible for full conversion through secondary market.
Benin10/23/85TighteningClaims on foreign countries or on nonresidents arising from merchandise exports to be sold to authorized intermediaries which are required to repatriate such funds to Benin by transfers through the BCEAO.
El Salvador2/27/85LiberalizationThe proportion of proceeds from nontraditional exports (other than medicines, fertilizers, insecticides, and their inputs) to Central America that can be sold in the parallel market increased from 50 percent to 70 percent.
3/13/85LiberalizationCotton export proceeds from the 1984/85 and 1985/86 harvests can be sold at the parallel market rate.
6/12/85LiberalizationLimit on the amount of coffee export proceeds converted at the parallel market rate increased.
6/12/85LiberalizationPart of the proceeds from sugar exports to the U.S. preferential quota market during the 1985/86 harvest period can be sold in the parallel market.
6/12/85LiberalizationProportion of foreign exchange proceeds from exports of shrimp and prawns to be sold in the parallel market increased from 80 percent to 100 percent.
6/12/85LiberalizationProportion of foreign exchange proceeds from exports to Central America to be sold in the parallel market increased from 70 percent to 100 percent, except for fertilizers, fungicides, insecticides, herbicides, medicines, and other goods involving imported inputs payable 100 percent through the official market, which are to be sold in the official market.
6/12/85LiberalizationAll foreign exchange proceeds from exports of nontraditional exports to countries outside Central America can be sold in the parallel market.
Egypt1/3/85TighteningUse of foreign exchange retention accounts limited to payments related to the economic activities of the exporters.
4/6/85LiberalizationRight of private sector to finance imports from own foreign exchange held in Free Accounts restored.
Guatemala2/21/85LiberalizationUp to 50 percent of proceeds from exports of meat and nontraditional exports outside listed areas to be surrendered in the banking market.
3/29/85LiberalizationUp to 50 percent of proceeds from cotton exports to be surrendered in the banking market.
5/10/85LiberalizationForeign exchange proceeds from exports of sugar outside quota converted fully in the banking market for the 1984/85 season only.
10/23/85LiberalizationExporters to convert up to 25 percent of proceeds from coffee exports, 10 percent from cardamom exports, and 100 percent from sugar exports outside quota at the banking market during 10/24/85 to 12/31/85.
Honduras11/20/85LiberalizationExporters of meat to retain up to 25 percent of their foreign exchange proceeds to finance own imports.
Madagascar4/9/85LiberalizationRetention of specified percentage of export proceeds in convertible accounts denominated in Malagasy francs extended to all nontraditional exports. These funds to be used for the importation of spare parts and other essential inputs.
Mexico6/6/86LiberalizationFacility called DIMEX introduced, under which exporters allowed to import free of permit up to 30 percent of their export proceeds, or a higher percentage with prior authorization of the Secretariat of Commerce and Industrial Promotion. Such imports also eligible for reimbursement of import taxes.
Nicaragua2/8/85MixedApplication of mixed rates to proceeds from specified export products discontinued, with the official rate of C$28 = US$1 applicable to proceeds of all exports other than printed material for which a rate of C$50 = US$1 was introduced.
5/20/85TighteningProducers selling cattle to the State Marketing Company entitled to purchase U.S. dollars from Central Bank at official rate, amounts varying from US$2 to US$11 per head of cattle depending on quantity and quality; such dollars can be sold at the “free” market rate.
11/4/85TighteningProducers selling coffee to Encaffe allowed to purchase U.S. dollars at the official rate from the Central Bank, US$5 for a quintal of coffee bean; private producers can use such dollars for any purpose or sell them at the “free” market rate while public producers can use them to either pay for essential imports or sell them at the “free” market rate to pay bank debt in local currency.
Paraguay5/27/85TighteningA minimum export price for an average type of cotton was set.
11/15/85LiberalizationForeign exchange proceeds representing the difference between actual sales price and official minimum export price to be credited to exporters to finance future expenditure related to exports.
Peru1/10/85TighteningForeign exchange proceeds from exports to be surrendered within 30 days of expected receipt date.
Sierra Leone5/17/85LiberalizationGold and diamond exporters allowed to retain all their foreign exchange earnings or to sell part at rates freely determined between buyers and sellers.
12/17/85TighteningExporters of gold and diamonds permitted to retain only 25 percent of export proceeds for their imports of essential goods and machinery related to mining operations, the remaining 75 percent to be surrendered to the Bank of Sierra Leone.
Somalia1/1/85LiberalizationExporters to retain 65 percent of their foreign exchange proceeds.
Sudan2/12/85TighteningProportion of export proceeds from cotton and gum arabic to be surrendered at official rate increased from 75 percent to 100 percent. Other export proceeds transferred from the commercial bank foreign exchange market to official foreign exchange market.
Syrian Arab Republic12/30/85TighteningSpecified export products, which were subject to surrender at the parallel market rate, to be surrendered at the tourist market rate.
Tanzania7/1/85LiberalizationForeign exchange retention quotas for authorized exporters increased from 5–20 percent to 10–50 percent of export proceeds; higher retention ratios can be granted on a case-by-case basis.
Yugoslavia12/6/85TighteningShare of exports proceeds to be surrendered to the Central Bank raised from 44.1 percent to 51 percent while the proportion to be surrendered to republics and provinces reduced from 10 percent to 7 percent, with the share retained by exporters reduced from 45.9 percent to 42 percent.
12/6/86TighteningAll foreign exchange earnings from exports required to be surrendered to the banking system immediately upon repatriation with effect from 9/1/86.
Other
Industrial countries
France12/2/85LiberalizationMaximum amount of export proceeds that can be received in the form of French foreign bank notes or other bank notes raised from F 50,000 to F 100,000.
United States1/11/85LiberalizationSimplified and clarified process for reviewing applications for export trade certificates of review.
4/12/85LiberalizationRequired quarterly rather than monthly reporting for exports destined for Switzerland and Yugoslavia.
9/9/85TighteningSanctions imposed against South Africa including ban on nuclear exports with exceptions, on computer exports to agencies of the South African Government dealing with race relations policies, and on bank loans with some exceptions.
Developing countries
Argentina1/25/85TighteningExport firms permitted to form export consortia or cooperatives.

Establishment of international trading companies permitted, provided they engage in a minimum of trade in promoted exports and maintain positive trade position.

Provision for Central Bank financing for opening of foreign offices.

Firms permitted to engage in countertrade when marketing promoted exports.
12/30/85. . .A maximum period of 180 days established for completion of countertrade operations.
Costa Rica5/20/85TighteningSettlements of trade with Central America to be made in U.S. dollars.
India2/1/85LiberalizationA Composite Allocation of Foreign Exchange (CAFEX) scheme was instituted under which eligible companies can receive foreign exchange permits for specified amounts, valid for one year, provided foreign exchange for a minimum of Rs 0.1 million for business travel or other expenditure abroad had been released to such companies against ad hoc permits during the year preceeding date of application. Holders of CAFEX permits able to acquire foreign exchange from authorized dealers’ branches when sending representation abroad for export promotion and other business related purposes.
Indonesia4/27/85Responsibility for collecting export taxes transferred from customs to the foreign exchange banks.
7/26/85LiberalizationAuthorized locations for import and export activities increased to 67 seaports and 16 airports.
Nepal1/9/85TighteningLetters of credit required for exports of specified exports with a value exceeding US$1,000, except for goods exported on the basis of barter trade.
Paraguay2/18/85TighteningReporting requirements established for cotton ginners on raw cotton bought, volume produced, total exports, sales to other firms, and existing stocks.
6/28/86TighteningCommercial firms engaging in export activities required to register at the Central Bank.
7/3/86TighteningMinimum capital requirements for firms to register as export firms. Exporters can operate with letters of credit for up to US$100,000, with transactions above the amount to be made with anticipated foreign exchange; exports to countries with which Paraguay maintains bilateral credit agreements are excluded from this clause.
Philippines3/25/85LiberalizationInspection, commodity, and export clearance requirements for exports eliminated with a few exceptions.
8/23/85TighteningRestoration for six months of export clearance requirements for iron and steel scrap.
8/7/85TighteningGovernment agencies prohibited to allow log exports unless log exporter presents a written authorization from the foreign importer to inspect the merchandise.
10/22/85TighteningLog shipments made prior to issuance of export declaration to be inspected by Philippine Government representatives at all unloading ports abroad.
11/14/85LiberalizationProcessing and issuance of export documents to be centralized at the Philippine Trade Center.
Thailand2/6/85TighteningPermissible ratio of coffee exports between nonmember and member countries of ICO changed from 1.2:1 to 1.1:1. Floor price requirement to be paid by exporters to farmers set.
2/11/85TighteningExporters of canned thunnidae required to join the Thai Food Processors’ Association.
Trinidad and Tobago10/1/85TighteningExporters planning to sell to Guyana to make sure that Guyanese importers attest to the availability of foreign exchange.
Current Invisibles
Foreign Exchange Allocations for Travel, Medical Expenses, or Studying Abroad
Industrial countries
France12/2/85LiberalizationMonthly limits on amounts freely remitted abroad by residents and on outward remittances for family support doubled to F 3,000 and F 6,000, respectively.
Italy10/16/85LiberalizationLimits on use of credit cards abroad by tourists for purchase of consumer goods relaxed.
Spain5/24/85LiberalizationBasic exchange allowance for tourist and business travel raised by 50 percent.
Developing countries
Bangladesh9/3/85LiberalizationFacility (EFCA) instituted from which funds can be used to meet educational expenses of resident immediate family members of nonresident nationals. Eligibility conditions and terms similar to those of other foreign currency accounts.
Chile12/11/85LiberalizationBasic travel allowance increased from US$200 to US$500 a trip for travel to Latin American and Caribbean countries, and from US$800 to US$1,500 a trip for travel to other countries.
Cyprus1/1/85LiberalizationBasic tourist travel allowance increased from £C 350 to £C 450 a person a year.
2/28/85LiberalizationAuthorized banks can sell foreign exchange for business or professional travel abroad up to £C 100 daily within a limit of £C 1,000, without reference to the Central Bank. They can also issue credit cards valid abroad to pay hotel and restaurant bills and transportation expenses with a £C 60 day limit and £C 600 total limit.
7/19/85LiberalizationEducation allowances for the 1985/86 year raised between 4 percent and 10 percent, depending on destination.
Dominican Republic1/23/85TighteningProceeds from transactions financed with credit cards to be directed to the Central Bank.
El Salvador6/12/85LiberalizationExchange restriction aspect of the 100 percent advance deposit requirement on official foreign exchange requests for medical treatment abroad abolished.
6/12/85TighteningRequests for invisible payments abroad contained in “G” list, including travel, eligible for financing at parallel market rate made subject to prior approval by Central Bank, except for nonresident holders of foreign currency deposit accounts.
Ethiopia1/24/85TighteningA foreign exchange allowance for business travel set at the equivalent of B 125 a person a day, for a maximum period of 20 days.
8/1/85LiberalizationThe foreign exchange allowance of B 600 an adult a year for tourist travel was repealed.
Guatemala7/2/85LiberalizationPurchases of foreign exchange for university education and medical treatment abroad as well as for official travel to be made through the banking market.
Israel2/10/85LiberalizationUse of credit cards abroad by Israeli residents authorized within the limits of the foreign currency allowance.
5/20/85TighteningForeign currency allowance for Israeli citizens travelling abroad reduced from US$1,000 to US$800 an adult a journey.
6/15/85TighteningThe right for an additional allocation of foreign currency for business travel abroad to cover only an employee travelling abroad on business or an authorized exporter; the special allocation is for US$120 per day, not exceeding US$2,400 per trip.
6/15/85TighteningAmount of foreign currency a foreign resident is permitted to purchase before leaving Israel, without documentary proof that he had brought in a larger amount, reduced from US$500 to US$100.
7/15/85TighteningRight of a tourist to buy foreign currency against document showing conversion of foreign currency into Israeli sheqalim limited to US$5,000 for a person over 18 years and to US$2,000 for a person under 18 years.
Korea3/2/85TighteningMonthly allowances for studying abroad reduced from $1,500 to $1,000 per individual, and from $2,000 to $1,500 per family. Bona fide requests above these limits continued to be approved by the Central Bank.
Malta9/16/85LiberalizationProhibition of official foreign exchange sales for tourist travel to Italy lifted.
Morocco4/29/85LiberalizationExchange allocations for foreign nationals residing in Morocco to cover costs of higher education abroad increased from DH 1,000 to DH 1,200 a month.
7/19/85LiberalizationStandard allowance a day and a trip for business travel other than by exporters and professional members of the tourist industry raised to DH 750 and DH 7,500, respectively.
10/1/85LiberalizationForeign exchange allowances for studying abroad raised.
Philippines9/10/85NeutralBanks reminded to stamp on passports and passenger tickets of departing residents amount of foreign exchange withdrawn from passenger’s foreign currency deposit account for use as travel funds.
10/21/85NeutralBanks reminded to limit sales of foreign exchange for foreign travel to specified travelers.
Portugal8/3/85LiberalizationForeign currency allowances for tourist travel increased from the equivalent of Esc 30,000, 50,000, and 70,000 to Esc 40,000, 70,000, and 100,000, respectively.
Somalia1/1/85LiberalizationLimits on foreign exchange allowance for travel and other purposes raised.
Suriname1/15/85TighteningForeign exchange allowances for travel abroad reduced to SF 50 a person a day up to SF 250 a calendar year for travel to Guyana and French Guinea, and SF 375 a person a calendar year for travel to all other countries. Use of the latter allowances does not preclude the other.
5/9/85TighteningForeign exchange allowances for travel abroad reduced to SF 50 a person a calendar year for travel to Guyana and French Guinea and increased to SF 475 a person a calendar year for travel to all other countries. Use of the latter allowance does not preclude the other.
Trinidad and Tobago1/9/85TighteningTax of 10 percent imposed on sales of foreign exchange for tourist and business travel and emigrant’s remittances.
12/18/85LiberalizationThe 10 percent tax on sales of foreign exchange for tourist and business travel and emigrant’s remittances abolished.
Tunisia6/28/85LiberalizationDaily foreign exchange allowance withdrawable out of EFAC accounts for business travel without justification doubled to D 100.
6/28/85LiberalizationAnnual limit on debits for EFAC accounts to cover foreign travel raised from D 4,000 to D 5,000—D 25,000 depending on value of exports. Allowable level of commissions payable out of these accounts raised from 3 percent to 5 percent and 8 percent and up to 25 percent of such commissions can be credited to the EFAC account.
10/7/85LiberalizationBasic allowances for business and holiday travel to be denominated in U.S. dollars.
Zimbabwe8/5/85LiberalizationThe annual foreign exchange allowance for tourist travel increased from Z$360 to Z$450 a person.
10/7/85LiberalizationThe annual foreign exchange allowance for post-secondary education increased from Z$750 to Z$4,000 a student in universities other than those in the United States and the United Kingdom and from Z$6,000 to Z$10,000 for university students in the latter countries.
Outward Transfers or Payments for Services Rendered by Nonresidents
Industrial countries
Finland3/1/85LiberalizationPrior approval from Central Bank no longer needed for transfer abroad of dividends from nonresident direct investment through an authorized bank.
Japan7/30/85NeutralAnnounced readiness to discuss relaxation of existing restrictions on services in a new round of Multilateral Trade Negotiations. Specific liberalization measures to be taken in the transportation and insurance sectors.
Developing countries
Argentina1/10/85Scheme for liquidation of interest obligations not covered by exchange rate guarantee arising from principal payments, covered or not by exchange guarantee, due foreign banks up through 5/31/85. Ten percent interest accrued paid in cash, remaining 90 percent through a 120-day dollar-denominated certificate of deposit issued by a local commercial bank.
2/27/85Direct obligations of private and public sector to foreign official and foreign private banks, respectively, excluded from the above-mentioned scheme as not included in the commercial bank refinancing agreement.
4/4/85List issued of debt service obligations refinanced under Paris Club and, consequently, not to be paid upon maturity.
6/3/85Period for the sale of foreign currency to cover payments falling due between January and May 1985 extended to 6/14/85.
7/1/85Regulations issued concerning refinancing of foreign currency principal obligations of the private sector not covered by exchange guarantee maturing through 12/31/85 and of accrued interest on these obligations. Principal obligations refinanced, following constitution of deposit by debtor, by issue of Central Bank obligations (BCRA Notes). BCRA Notes repaid in 15 semiannual installments, 3-year deferred period, paying LIBOR or CD rates as chosen by creditor. Of interest accrued through 10/31/85, 10 percent to be paid in cash and 90 percent through 120-day dollar-denominated CDs. Obligations covered by commercial bank refinancing of public sector debt and by Paris Club accord excluded from these regulations.
7/1/85Regulations issued concerning refinancing of foreign currency principal obligations covered by exchange guarantee maturing in 1984 and 1985 and of accrued interest on these obligations. Principal obligations refinanced, following constitution of deposit, by dollar-denominated Government Notes, with same terms as BCRA Notes. Payment of interest accrued through 12/31/84 to be paid 10 percent cash and 90 percent with 120-day certificate of deposit, while that accrued on principal maturing in 1985 paid in cash when Note is issued. Obligations covered by commercial bank refinancing of public debt and by the Paris Club accord excluded from these regulations.
7/8/85Deposit scheme for debt service obligations, not covered by exchange guarantees, maturing before 7/1/85. Deposit to be constituted in local currency before 7/27/85. Deposits and corresponding debt service obligations discharged according to regulations issued 1/1/85.
7/8/85Persons with debt service and nonfactor service payments obligations, including arrears, to be paid cash or through subscription of U.S. dollar-denominated bonds to constitute deposits in local currency. Central Bank to determine validity of each operation within 45 days of deposit.
7/8/85Scheme for liquidation of interest obligations due commercial banks, not covered by exchange guarantee, extended to cover obligations due up through 10/31/85, except interest on bonds for amounts falling due by 12/31/85.
7/26/85Obligations subject to Central Bank approval falling due through 7/15/85 for which no requests were submitted by 7/30/85 to be considered refinanced for a minimum of one year from 7/15/85.
7/29/85Schedule of constitution of local currency deposits against debt service obligations regulated on 7/8/85 announced. If required deposits not made, obligations considered refinanced by an additional 90 days.

Schedule for liquidation of interest obligations not covered by exchange guarantee under scheme announced 7/8/85. If not liquidated by indicated dates, obligation considered refinanced by an additional 90 days.
Bangladesh1/10/85LiberalizationMaximum permissible amount of membership fees that can be remitted to foreign professional organizations under Wage Earner’s Scheme raised from equivalent of US$50 to US$100 a person a year.
Barbados1/11/85LiberalizationTax on outward remittances of pension funds to overseas insurers reduced from 15 percent to 6 percent. Coverage of tax widened to include all overseas pension fund administrators.
Bolivia8/29/85LiberalizationRestrictions on the allocation of foreign exchange for invisible payments abolished.
Botswana7/8/85LiberalizationThe terminal allowance for departing temporary residents raised from P 6,000 to P 10,000.
8/23/85LiberalizationLimits on various types of invisible payments raised.
12/2/85LiberalizationEmigration allowance for permanent residents raised from P 75,000 to P 100,000.
Brazil6/28/85LiberalizationThe 40 percent rebate on tax payment by remitters of interest on loans, commissions, and expenses related to foreign transactions reduced to zero.
10/7/85TighteningMinistries and companies under direct or indirect control of the federal government prohibited from leasing residential real estate abroad.
12/20/85TighteningMaritime agreement reserving approximately 80 percent of Brazilian-U.S. ocean trade to Brazilian and U.S. carriers in equal shares extended through end-1986.
Dominica7/3/85LiberalizationAd valorem tax of 10 percent on all travel tickets abolished.
Egypt1/3/85TighteningForeign exchange in Free Accounts no longer can be used to effect import payments.
1/3/85TighteningImport accounts abolished and replaced by Free Accounts.

Restrictions on the use of Foreign Exchange Retention Accounts introduced limiting exporters to use these accounts only for own visible and invisible payments.
1/23/85LiberalizationPrivate importers with outstanding balances in Free Accounts and Import Accounts on 1/13/85 authorized until 3/21/85 to use funds in Egyptian pounds from the sale of such balances (at a given exchange rate) for own imports.
4/6/85LiberalizationRight of private sector to finance imports from own foreign exchange held in Free Accounts restored.
El Salvador6/12/85LiberalizationConversion of foreign exchange proceeds from transportation, international travel and investment, government services, insurance, reinsurance and other service exports, except remittances by the Government for services rendered by embassies and consulates abroad and interest received by public and banking sectors, transferred to the parallel market.
6/12/85TighteningRequests for invisible payments abroad contained in “G” list, including travel, eligible for financing at parallel market rate made subject to prior approval by Central Bank, except for nonresident holders of foreign currency deposit accounts.
Guatemala9/23/85LiberalizationTransfer of dividends, profits, and private sector principal amortization payments falling due after 11/16/84 to be effected through the banking market.
Iraq7/10/85LiberalizationAuthorization granted for those not employed under contracts for the socialist sector to transfer abroad a monthly amount of ID 50, or 60 percent of their income, whichever is higher.
Israel2/17/85TighteningTax on foreign travel by Israeli citizens increased until 10/16/85 from the equivalent of US$100 to US$150 a person per journey, to be adjusted monthly in line with the CPI. Travel to Egypt, previously tax exempt, was made subject to a travel tax of US$50 a person until 10/16/85.
2/19/85TighteningA 20 percent surcharge imposed on airline and sea tickets purchased in Israel.
5/27/85TighteningForeign travel tax doubled until 9/15/85 to the equivalent of US$300 a person per journey abroad (from US$50 to US$200 in the case of travel to Egypt).
6/15/85TighteningIsraeli employer needs a specific authorization from the Controller of Foreign Exchange to pay wages in foreign currency to another Israeli citizen working abroad.
8/4/85LiberalizationTax on foreign travel to Romania by Israeli citizens reduced from the equivalent of US$300 to US$200.
9/15/85LiberalizationForeign travel tax reduced to US$150 for all countries except Egypt and Romania; for travel to these countries, foreign travel tax reduced to US$50.
10/17/85LiberalizationForeign travel tax reduced to US$100 for all countries except Egypt and Romania. Travel to Egypt was exempt from the tax, while that to Romania continues to be subject to a tax of US$50.
11/13/85TighteningImport service tax law renewed up to March 1987.
Libya1/16/85LiberalizationTransfer privileges applicable to nondiplomats employed in embassies, consulates, and U.N. agencies modified, with regulations applicable to them on or before 1/1/84 reinstated.
2/10/85LiberalizationPrivileges and obligations applicable to Libyan citizens extended to all Arab nationals (other than those employed in embassies, consulates, and UN agencies, with income originating from abroad) seeking to change nonresident status to resident.
Maldives11/1/85TighteningTourist resorts and foreigners, other than those working for the government, to produce documentary evidence of sales of foreign exchange to the Monetary Authority when paying taxes and rents.
Morocco3/22/85LiberalizationMaximum amount transferable for foreigners departing the country and having stayed for more than 24 years increased from DH 350,000 to DH 500,000.
4/29/85LiberalizationCeiling on transferable income from the liberal professions raised from DH 2,000 to DH 2,500 a month up to 30 percent to 50 percent of declared income.
Mozambique8/1/85TighteningSpecial buying rate for inward remittances of South African rand from Mozambican miners in South Africa reduced from Mt 40 per rand to Mt 35 per rand on 8/1/85, and to Mt 25 per rand on 9/1/85. The special rate discontinued on 3/1/86.
Nepal11/30/85LiberalizationStamp duty on purchases of foreign exchange eliminated.
Nicaragua2/8/85LiberalizationOfficial exchange rate of C$28 = US$1 applied to receipts from freight, insurance, port services investment income, and expenditures by foreign embassies. Also, applied to payments for transport services, expenditure of Nicaraguan embassies and commercial offices abroad, commercial payments, and payments for insurance and expenses related to the opening of letters of credit and similar modes of payments. The “free” market rate to apply to all payments of invisibles other than the above.
5/20/85LiberalizationProceeds from tourism and private remittances eligible for conversion at the “free” market rate. Foreign exchange for invisible payments not eligible for settlement through the official market can be purchased at the “free” exchange market.
7/13/85LiberalizationForeign exchange transactions for nontrade insurance and reinsurance to be effected at the official rate of C$28 = US$1, except those for aircraft, which should be effected at C$40 = US$1.
Nigeria1/1/85TighteningMaximum remittance of 2 percent of net profits before tax for technical services and management fees made subject to annual submission of detailed report on implementation of clauses in agreements.
Philippines1/28/85Settlement scheme established for all outstanding arrears under Paris Club as of 12/31/84, as well as for amortization payments due in 1985 and first half of 1986.
2/5/85Central Bank to process applications for payment of interest and other charges falling due on or before 12/31/84 to international financial institutions.

Regulations extending the period covered up to 5/31/85 issued on several occasions during the year.
2/28/85Amended cut-off date for depositing with Central Bank the peso equivalent of Paris Club loans subject to rescheduling.
4/16/85Amendments regarding peso deposits into blocked accounts with Central Bank in respect of arrears not covered by issuances and establishment of a cut-off date for making such deposits. Application for foreign exchange to service arrears on specified service payments not accepted by Central Bank after 6/30/85. Extended until 6/30/85 the deadline for Central Bank sales of nonassignable U.S. dollar-denominated Central Bank certificates of indebtedness (CBCIs) payable to foreign suppliers.
5/1/85LiberalizationRepealed punitive provisions and provided for creation of an inter-agency committee on contract worker remittances to implement incentives to Filipino workers abroad remitting funds through official channels.
5/28/85MixedAmendment to regulations governing payments of remittances, royalties, fees, or rentals.
7/5/85LiberalizationExporters authorized to buy foreign exchange from agent banks to pay for freight charges on export shipments made on c.i.f. basis without prior Central Bank approval, subject to submission of documentary evidence by agent banks.
8/22/85LiberalizationInterest and other charges due foreign banks and financial institutions can be remitted on due dates, subject to prior Central Bank approval. Interest due on short-term foreign borrowings of commercial banks can be settled directly without prior Central Bank approval.
Rwanda9/16/85TighteningSales of movable items by a foreign resident or a nonresident to a resident of RF 500,000 or more made subject to prior authorization by the Central Bank when not effected in connection with a normal commercial activity legally exercised by the parties involved.
Sierra Leone7/1/85TighteningForeigners arriving in the country, other than diplomats accredited to Sierra Leone, required to change US$100 or its equivalent into local currency.
Somalia1/1/85LiberalizationExporters of services authorized to retain up to 65 percent of their foreign exchange proceeds in export-promoting accounts.
South Africa9/30/85TighteningRestrictions imposed on outward remittances of profits by local companies, including a regulation that dividends paid to nonresidents could be declared only from profits earned since 1/1/84.
Sudan6/16/85TighteningFor any amount of foreign exchange sold to commercial banks, a Sudanese National Working Abroad (SNWA) was to receive Sudanese pounds at the commercial bank rate plus a 10 percent bonus in the form of a pound-denominated coupon that can be exchanged at the official rate, used to pay custom duties, for purchases in duty-free shops, exchanged for a car import license or for an entitlement to buy land from the government at a favorable price.
11/20/85LiberalizationBonus payable on fund repatriated by Sudanese Nationals Working Abroad (SNWA) increased from 10 percent to 15 percent, and the minimum amount of repatriated funds to qualify for conversion of bonus coupons into a car import license reduced from US$10,000 to US$8,000.
Suriname2/21/85TighteningPersons entering Suriname required to exchange through official channels specified minimum amounts of foreign currency. Foreign Exchange Commission can grant an exemption for returning students and minors with parents residing in Suriname.
6/4/85TighteningTransfer abroad of pensions on behalf of nonresidents possible only with prior permit from the Foreign Exchange Commission.
Zambia10/4/85MixedExpatriate remittances to be paid at the pre-auction rate between 10/4/85 and 12/31/85 and from 1/1/86 to be expressed in U.S. dollars.
10/7/85LiberalizationA “no questions asked” system instituted for foreign currency transfers in Zambia.
1/1/86MixedExpatriate remittances to comprise an inducement allowance payable monthly within a limit of US$6,600 a person a year and an end-of-contract gratuity in U.S. dollars up to 25 percent of the cumulative inducement allowance.
Zimbabwe1/1/85TighteningBlocked funds, converted into government bonds or not, considered as new venture capital when matched by an inflow of investment funds from abroad on a 50–50 or similar basis if reinvested in Zimbabwe in an approved project. As new venture capital the total investment is eligible for remittable dividends for up to 50 percent of after-tax profits. The “blocked” portion of the new investment to remain reinvested in the country for a minimum of seven to ten years depending on individual cases.
5/21/85LiberalizationSuspended remittances of profit and dividends declared from 3/27/85 through 12/31/85 and maintained in “suspended accounts” with commercial banks to be released starting 1/11/86 by means of six-year, 4 percent government bonds. Effective 1/1/86, the pre-March 1984 regulations on remittances of profits and dividends on the basis of a maximum of 50 percent after-tax profits to be reinstated.
Import and Export of Foreign and Domestic Currency Notes, and Holdings of Foreign Currency Domestically
Industrial countries
Iceland4/2/85LiberalizationMaximum amount that resident and nonresident travelers can bring in and out of Iceland in bank notes and coins raised from ISK 3,000 to ISK 8,000 in all possible denominations.
Spain5/24/85LiberalizationAmount of currency notes of the Bank of Spain which travelers can take with them raised from Ptas 20,000 to Ptas 100,000.
Developing countries
Cyprus1/25/85LiberalizationMaximum amount of Cyprus bank notes allowed to be imported or exported from Cyprus by travellers increased from £C 10 to £C 50.
Guinea5/12/85LiberalizationResidents authorized to hold foreign currency.
India1/15/85LiberalizationAuthorization to dealers and money changers to sell foreign currency notes and coins up to the equivalent of US$20 extended to any business branch of the authorized sellers and not just their bureaus at airports or seaports.
Israel4/4/85TighteningIsraeli residents travelling abroad prohibited from taking currency which is legal tender abroad beyond the 24 currencies specified in the general exchange control permit.
6/15/85LiberalizationAn Israeli citizen travelling abroad permitted to take out foreign exchange currencies not defined as a foreign currency under the existing law but these foreign currencies to form part of the overall allocation.
Madagascar6/3/85TighteningForeign technical assistants and civil servants in Madagascar may credit their regular bank amounts only with amounts from a foreign account in Madagascar francs or with salaries paid in Madagascar francs.
Nepal8/9/86LiberalizationCommercial banks were authorized to accept specified deposits denominated in U.S. dollars and pounds sterling and to fix the interest rates on such deposits. Four other currencies—Swiss francs, French francs, Japanese yen, and deutsche mark—can be exchanged for either U.S. dollars or pounds sterling at the prevailing official rates of exchange. It also regulated withdrawals on these deposits.
Pakistan8/6/85LiberalizationMaximum period for Pakistan nationals to hold foreign currency accounts with a local bank increased from six months to three years from date of arrival in the country.
8/11/85LiberalizationPermission granted to authorized dealers to accept term deposits in foreign currency from banks operating abroad, including financial institutions owned by them. Deposits should be made for at least US$10 million (or equivalent in other currencies) for one year.
Philippines10/29/85TighteningOver-the-counter purchases of foreign coins by the Central Bank limited to those denominated in U.S. dollars, in a minimum amount of US$25 a customer.
Sudan2/12/85Tightening“Free” foreign exchange accounts held by residents cannot be replenished with foreign currency transferred from another foreign exchange account, or with funds from unknown sources; balances in such accounts can only be used for specified purposes.

Private nonbank foreign exchange dealers no longer permitted to conduct foreign exchange operations.
Tunisia2/11/85LiberalizationSpecial facility established for deposit and withdrawal of foreign bank notes to or from foreign accounts in convertible foreign currencies, lowering the cost of these operations and introducing a single commission not to exceed 0.4 percent of transaction value.

Capital Controls
Commercial Banks’ International Transactions
Industrial countries
Denmark6/11/85LiberalizationMinimum permissible maturity for finance loans contracted abroad by residents lowered.
Finland9/1/85LiberalizationIncreased access for firms to engage in forward market operations.
Italy6/11/85LiberalizationIncrease in limits on financial borrowing abroad by residents without authorization.
Norway9/25/85TighteningForeign currency loans to be provided only to borrowers licensed to raise such loans.
United States9/9/85TighteningBank loans to the South African government prohibited, with certain exceptions.
Developing countries
Argentina6/28/85Introduction/TighteningIncrease in minimum maturity on inflows of foreign financial capital. Reduction in maximum permissible maturity on export prefinance.
7/1/85TighteningRegulations concerning the refinancing of foreign currency obligations.
7/8/85Deposit scheme for debt service obligations not covered by exchange guarantee.
7/19/85TighteningPartial lifting of the suspension of withdrawal of funds from accounts in foreign currencies and lengthening in terms for export prefinance.
Bahrain8/1/85TighteningApproval procedure for money changers tightened.
Dominican Republic3/22/85LiberalizationCertain foreign exchange receipts exempted from surcharges.
El Salvador6/12/85LiberalizationTransfer of all capital inflows and certain capital outflows to the parallel market.
Guatemala9/23/85LiberalizationTransfer of capital transactions from the official to the private exchange market.
Israel4/4/85LiberalizationResidents permitted to make voluntary prepayment by drawing on commercial overdraft accounts abroad.
Korea3/1/85LiberalizationDiscriminatory restrictions eased for foreign banks’ branches.
Malaysia10/25/85LiberalizationInterest payments to nonresidents by commercial banks exempted from the withholding tax.
Morocco4/29/85LiberalizationCapital accounts below a certain size were made fully transferable until 12/31/85.
Peru7/27/85TighteningService payments on public sector short-term debt to national or foreign banks to be authorized only if matched by a loan from such creditors at least as large as the repayments, and conforming with specified conditions.
South Africa9/1/85TighteningA standstill arrangement for debt payments was introduced for a period of four months. (On 1/1/86, extended for another three-month period.)
Thailand5/1/85Registration procedure for all private foreign borrowing.
Turkey12/1/85LiberalizationIncrease in maximum amount of foreign exchange that commercial banks could hold abroad as cover for their liabilities.
Zaïre7/1/85TighteningReduction in limit of net foreign assets of banks.
Nonresidents’ Accounts and Residents’ Foreign Exchange Accounts
Industrial countries
Denmark6/11/85LiberalizationExtension of maturity term for foreign currency accounts of residents with domestic banks.
Norway1/1/85RemovalThe limit of 30 days on accounts opened with foreign banks by Norwegian companies was abolished.
Developing countries
Argentina5/6/85TighteningReserve requirement of 100 percent on growth of foreign currency-denominated deposits.
5/17/85TighteningSuspension for 120 days of deposits and withdrawals from accounts denominated in foreign currencies.
7/25/85TighteningReserve requirement of 100 percent on foreign currency deposits.
Ghana7/17/85LiberalizationAccounts in convertible foreign currency permitted for residents and nonresidents.
Greece5/7/85LiberalizationResidents permitted to open one- to three-month deposit accounts in foreign currencies.
Israel2/4/85TighteningMinimum term for payments of interest on foreign currency-denominated deposits raised.
7/1/85TighteningNew deposits in foreign currency-denominated deposits not to be effected in domestic currency.
Jamaica1/2/85TighteningAccounts in convertible foreign exchange by residents and nonresidents to be abolished.
Nigeria10/1/85LiberalizationAuthorization for residents to open foreign currency accounts in Nigeria.
Somalia1/1/85LiberalizationExporters permitted to retain up to 65 percent of foreign exchange proceeds in certain accounts. The use of funds in foreign exchange accounts was liberalized.
Portfolio Investment
Industrial countries
Denmark6/11/85LiberalizationLiberalization in approval procedures for residents’ purchases of unlisted foreign securities.
Finland3/1/85LiberalizationCurrency option contracts permitted.
6/24/85TighteningSale abroad of bonds and debentures quoted on the Helsinki Stock Exchange prohibited.
France9/1/85LiberalizationIncrease in the proportion of investment denominated in French francs which residents were allowed to make outside Common Market countries.
4/3/85LiberalizationIssues of Eurobonds in French francs permitted.
12/2/85LiberalizationRegulations for outward portfolio and direct investment changed.
Germany, Fed. Rep. of5/1/85LiberalizationThe access to lead-manage foreign deutsche mark bond issues extended to foreign banks, subject to certain conditions. Suspension of Central Capital Subcommittee which had formulated issue calendars for foreign bond issues in deutsche mark.
Italy6/11/85LiberalizationNonresidents permitted to acquire shares in Italian mutual funds.
10/23/85RemovalBan on transfer of foreign securities and loans between residents lifted.
10/23/85LiberalizationDeposit requirement in lira for portfolio investment abroad reduced.
Japan4/1/85RemovalElimination of the withholding tax on interest on nonresident-owned Euro-yen bonds.
4/1/85LiberalizationQualification standards for the issues of Euro-yen bonds and yen-denominated bonds by nonresidents were relaxed.
4/1/85LiberalizationDismantling of the restrictions on Euro-yen loans to nonresidents.
6/1/85LiberalizationA yen-denominated banker’s acceptances market was established.
6/17/85LiberalizationFloating rate notes, dual currency bonds, currency conversion bonds, deep discount bonds and zero-coupon bonds issued by nonresidents to be allowed on the Euro-yen market.
6/22/85LiberalizationSome foreign banks allowed to participate in the management of corporate pension funds in Japan.
7/1/85 and 10/1/85LiberalizationThe qualification standards for the issues of Euro-yen bonds by residents were further relaxed.
12/24/85LiberalizationThe Tokyo Stock Exchange decided to grant membership to ten securities companies, including six foreign securities companies.
Norway1/1/85LiberalizationPurchase by residents of foreign bonds.
Spain5/29/85LiberalizationLiberalization of authorization procedure for foreign direct and portfolio investments.
Switzerland5/15/85LiberalizationThe maximum limit of each individual foreign bond issue was abolished.
Developing countries
Korea3/29/85,

4/19/85,

and

4/30/85
LiberalizationAccess for nonresidents’ purchases of Korean bonds and equity increased.
11/11/85LiberalizationCertain domestic companies were authorized to issue convertible bonds and depository receipts abroad.
Singapore5/10/85LiberalizationTax exemption period for income earned from offshore loan syndication in Singapore lengthened and the five-year limit on the exemption from income earned from fund management abolished.
Direct Investment
Industrial countries.
Australia10/29/85LiberalizationRegulations for foreign direct investment in Australia liberalized.
Denmark6/11/85LiberalizationLimit raised on inward and outward foreign investment.
France2/25/85LiberalizationIncrease in the size of foreign direct investment in France which is exempt from prior authorization.
Italy10/16/85RemovalCompulsory deposit requirement in lira for direct investment abroad abolished.
Developing countries
Argentina8/29/85TighteningForeign direct investment in computer, telecommunications, and electronic equipment sectors subject to prior approval.
Ecuador1/17/85LiberalizationNew regulations for direct investment by foreign oil companies.
2/28/85LiberalizationNew regulations for reinvestment of profits from foreign investment.
3/28/85IntroductionCertification procedure for the value of foreign investment inflows in the form of goods.
Korea7/1/85LiberalizationAccess liberalized for foreign participation in industrial areas and sectors.
Malaysia1/24/85LiberalizationRegulations changed for the right of Singapore companies to retain shares in companies in Malaysia.
2/2/85LiberalizationApproval procedures expedited for foreign direct investment.
4/12/85LiberalizationThe limit on foreign investment participation in resident companies relaxed.
Nigeria1/1/85LiberalizationDividends to nonresidents allowed to be reinvested in new companies, subject to certain conditions.
South Africa8/19/85IntroductionProhibition of direct investment in Australia by the South African government.
United Arab Emirates1/9/85TighteningTransfer abroad of profits by foreign banks were made subject to prior approval by the Central Bank.
1Australia, Bolivia, Burundi, Cape Verde, Dominican Republic, El Salvador, Ethiopia, Guatemala, Mexico, New Zealand, Nicaragua, Paraguay, Peru, Philippines, Sierra Leone, South Africa, Swaziland, Tanzania, Uganda, United Kingdom, United States, Uruguay, Venezuela. More than one notification was made in a number of these countries.
2Excluding the arrangements of Democratic Kampuchea, for which information is not available.
3Based on the Fund’s multilateral exchange rate model (MERM), in which the implicit weighting structure takes account of the relative importance of the country’s trading partners in its direct bilateral relationships with them, competitive relationships with “third” countries in particular markets, and estimated elasticities affecting trade flows.
4Notifications were received from Argentina, Bangladesh, Bolivia, Botswana, Chile, the People’s Republic of China, Ecuador, Egypt, Ghana, Greece, Guinea, Hungary, Israel, Kenya, the Lao People’s Democratic Republic, Lesotho, Madagascar, Malawi, Malta, Mauritania, Mexico, Nepal, Nicaragua, Paraguay, Peru, Portugal, Somalia, South Africa, Sudan, Sweden, Trinidad and Tobago, Vanuatu, Viet Nam, Western Samoa, and the Yemen Arab Republic.
See Explanatory Note on Coverage of Part Two, page 75.
5Payments arrears evidence an exchange restriction under the Fund’s Article VIII, Section 2(a) or Article XIV, Section 2, when the authorities of a country are responsible for undue delays in approving applications or in meeting bona fide requests for foreign exchange for current international transactions as defined in Article XXX (d). Accordingly, when a government or a government entity, whose financial operations form part of the budgetary process, fails to meet an external payments obligation due to a lack of domestic currency resources, the resulting arrears are considered to evidence defaults by the government rather than exchange restrictions. Similarly, arrears incurred by governments participating in a common central bank are treated as defaults when they are due to the government’s inability to obtain domestic currency with which to purchase needed foreign exchange from the common central bank. Although these distinctions are relevant for the purposes of Articles VIII and XIV, in the context of the Fund’s policies on the use of its resources, defaults and other forms of arrears involving current and capital payments are viewed as having the same broad macroeconomic character and consequences, and are therefore treated in the same manner.
6The major conclusions of reviews of Fund policies were summarized in the Annual Report on Exchange Arrangements and Exchange Restrictions, 1983, and 1985.
7For a detailed discussion of the former reviews, see Annual Report on Exchange Arrangements and Exchange Restrictions, 1985, pages 36–37; and 1981, pages 22–23. See also IMF Survey, Vol. 14, No. 13, June 24, 1985.
8Certain types of what might be considered, for statistical and related purposes, capital transactions (e.g., normal short-term banking and credit facilities and payments for amortization of loans or for depreciation of direct investments) are defined as current international transactions under the Fund’s Article XXX.
9In September 1982 the Executive Board reviewed the Fund’s policy with respect to bilateral payments and countertrade arrangements. The conclusions of that review were summarized in the Annual Report on Exchange Arrangements and Exchange Restrictions, 1983 (pages 44–45).
10Global countertrade in 1980 was estimated to have been roughly about 1 percent of world trade; more recent estimates indicate that the percentage is now higher but is unlikely to exceed 10 percent.
11Prior to the January 1, 1986 enlargement, membership comprised Belgium, Denmark, France, the Federal Republic of Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, and the United Kingdom.
12For a relatively small number of products, the transition period is to be completed in seven years.
13Maghreb countries: Algeria, Morocco, and Tunisia; Mashreq countries: Egypt, Jordan, Lebanon, and Syria; and Cyprus, Israel, Malta, and Yugoslavia.
14The 65 ACP states associated with the EC are divided into the following categories by Lomé III: (1) the least-developed countries—Benin, Botswana, Burkina Faso, Burundi, Cape Verde, Central African Republic, Chad, Comoros, Djibouti, Dominica, Ethiopia, The Gambia, Grenada, Guinea, Guinea-Bissau, Kiribati, Lesotho, Malawi, Mali, Mauritania, Niger, Rwanda, St. Lucia, São Tomé and Principe, Seychelles, Sierra Leone, Solomon Islands, Somalia, Sudan, Swaziland, Tanzania, Togo, Tonga, Tuvalu, Uganda, and Western Samoa; (2) the island and landlocked countries—Antigua and Barbuda, The Bahamas, Barbados, Equatorial Guinea, Fiji, Jamaica, Madagascar, Mauritius, Papua New Guinea, St. Christopher and Nevis, St. Vincent and the Grenadines, Trinidad and Tobago, Vanuatu, Zaïre, Zambia, and Zimbabwe; (3) others—Belize, Cameroon, People’s Republic of the Congo, Côte d’Ivoire, Gabon, Ghana, Guyana, Kenya, Liberia, Mozambique, Nigeria, Senegal, and Suriname.
15Costa Rica, El Salvador, Guatemala, and Nicaragua.
16Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates.
17On January 1, 1986 EFTA membership comprised Austria, Finland, Norway, Sweden, and Switzerland.
18The members of Ecowas are Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, and Togo.
19Members are Burundi, the Comoros, Djibouti, Ethiopia, Kenya, Lesotho, Malawi, Mauritius, Rwanda, Somalia, Swaziland, Uganda, Zambia, and Zimbabwe. Angola, Mozambique, and Tanzania have observer status.
20Regional members are Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, the Central African Republic, Chad, the Comoros, Congo, Côte d’Ivoire, Djibouti, Egypt, Equatorial Guinea, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, the Libyan Arab Jamahiriya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Niger, Nigeria, Rwanda, São Tomé and Principe, Senegal, Seychelles, Sierra Leone, Somalia, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zaïre, Zambia, and Zimbabwe. Nonregional members are Austria, Belgium, Canada, Denmark, the Federal Republic of Germany, Finland, France, Italy, Japan, Kuwait, Korea, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, the United States, and Yugoslavia.
21Members are Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Zambia, and Zimbabwe.
22Regional members are Afghanistan, Australia, Bangladesh, Bhutan, Burma, Taiwan (see Explanatory Note on Coverage of Part Two, page 75), the People’s Republic of China, Cook Islands, Fiji, Hong Kong, India, Indonesia, Japan, Democratic Kampuchea, Kiribati, the People’s Republic of Korea, the Lao People’s Democratic Republic, Malaysia, Maldives, Nepal, New Zealand, Pakistan, Papua New Guinea, the Philippines, Singapore, Solomon Islands, Sri Lanka, Thailand, Tonga, Vanuatu, Viet Nam, and Western Samoa. Nonregional members are Austria, Belgium, Canada, Denmark, Finland, France, the Federal Republic of Germany, Italy, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States.
23Members are Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand.
24Members are Madagascar, Mauritius, and Seychelles.
25Members are Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela.
26Members are Antigua and Barbuda, Argentina, The Bahamas, Barbados, Belize, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Cuba, Dominica, the Dominican Republic, Ecuador, El Salvador, France, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, the Netherlands, Nicaragua, Panama, Paraguay, Peru, Portugal, St. Christopher and Nevis, St. Lucia, St. Vincent and the Grenadines, Spain, Suriname, Trinidad and Tobago, the United Kingdom, the United States, Uruguay, and Venezuela. Associate members are the British Virgin Islands, Montserrat, the Netherlands Antilles, and the United States Virgin Islands.
27Members are Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Christopher and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago.

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