Chapter

II. Main Developments in Exchange Arrangements and Exchange Rates

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 1984
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This section reports on major developments in members’ exchange rates and exchange arrangements as notified to the Fund in accordance with members’ obligations under Article IV, Section 2(a), of the Articles of Agreement. Developments in multiple exchange rate arrangements are summarized in a separate section on multiple currency practices.

Surveillance of exchange arrangements of members by the Fund, as required under Article IV, Section 3, is normally conducted in the context of consultations, but changes introduced during the intervening period between consultations are notified to the Executive Board. To facilitate the implementation of the Fund’s surveillance over exchange rate policies, members’ exchange arrangements are classified under three broad headings, as follows: (1) currencies that are pegged to a single currency or to a composite of currencies (including the SDR); (2) currencies whose exchange rates, although not pegged, have displayed limited flexibility compared with either a single currency or a group of currencies; and (3) currencies whose exchange rates are more flexible. The basic distinguishing factor 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 the broad headings in Table 1.

Table 1.Exchange Rate Arrangements as of March 31, 19841
Flexibility Limited Against a Single Currency or Group of CurrenciesMore Flexible
PeggedAdjusted according to a set of indicatorsOther managed floatingIndependently floating
U.S. dollarFrench francOther currencySDROther compositeSingle currency2Cooperative arrangements
Antigua and Barbuda

Bahamas3

Barbados

Belize

Bolivia

Djibouti



Dominica

Dominican Rep.3

Egypt3

El Salvador3

Ethiopia



Grenada

Guatemala

Haiti

Honduras

Iraq
Lao People’s Democratic Rep.

Liberia

Libya

Nicaragua3

Oman

Panama



Paraguay

St. Lucia

St. Vincent and Grenadines

Sierra Leone

Sudan3



Suriname

Syrian Arab Rep.3

Trinidad and Tobago

Venezuela3

Yemen Arab Rep.



Yemen, People’s Democratic Rep.
Benin

Cameroon

Central African Republic

Chad

Comoros

Congo



Gabon

Ivory Coast

Mali

Niger

Senegal

Togo



Upper Volta
Bhutan (Indian rupee)

Equatorial Guinea (Sp. Pta)

Gambia. The (£ stg.)

Lesotho (SAR)

Swaziland (SAR)
Burma

Burundi

Guinea3

Iran, Islamic Rep. of

Jordan



Kenya7

Rwanda São

Tomé and Principe

Seychelles



Vanuatu

Viet Nam
Algeria3

Austria

Bangladesh3

Botswana

Cape Verde

China. People’s Rep.3

Cyprus

Fiji

Finland7

Hungary

Kuwait

Madagascar



Malawi

Malaysia7

Malta

Mauritania

Mauritius

Nepal



Norway

Papua New Guinea

Romania

Singapore



Solomon Islands

Sweden

Tanzania

Tunisia

Zambia

Zimbabwe
Afghanistan3

Bahrain4

Ghana

Guyana

Maldives

Qatar4

Saudi Arabia4

Thailand

United Arab Emirates4
Belgium3

Denmark

France

Germany. Fed. Republic of

Ireland

Italy6



Luxembourg3

Netherlands
Brazil

Chile3

Colombia

Peru3

Portugal

Somalia5
Argentina

Costa Rica3

Ecuador3,9

Greece

Guinea-Bissau

Iceland

India8

Indonesia

Israel

Jamaica

Korea



Mexico3

Morocco

New Zealand

Nigeria

Pakistan



Philippines

Spain

Sri Lanka

Turkey

Uganda3



Western Samoa

Yugoslavia

Zaïre
Australia

Canada

Japan

Lebanon

South Africa



United Kingdom

United States

Uruguay

Under the provisions of the amended Article IV, Fund members have the right to maintain exchange arrangements of their choice, as well as certain obligations regarding the communication of these arrangements to the Fund. In accordance with these obligations, members notified the Fund during 1983 of some 60 changes in their arrangements. The changes included measures that resulted in a reclassification between or within the three categories described above, discrete adjustments of the exchange rate in terms of the peg, and a small number of changes in exchange rate margins and the form of composite peg. Included also were large discrete adjustments of exchange rates classified in the “More Flexible” category. To facilitate the symmetry with which pegged and flexible exchange rates were monitored, members’ effective exchange rates were also monitored on a continuous basis, and large changes on a “real” inflation-adjusted basis were notified to the Executive Board of the Fund on an experimental basis. Six such notifications of changes in excess of 10 percent in real effective rates since the preceding consultation with the member (or previous notification) occurred in 1983, when the system was introduced.

During the February 1982 review of members’ exchange regimes by the Executive Board, it was noted that under the provisions of the Second Amendment the international exchange rate system had continued to evolve toward greater flexibility of arrangements. A major aspect of this evolution has been the substitution of various forms of managed floating for pegged arrangements, in particular, arrangements involving a peg to a single currency. Another feature of the movement away from single currency pegs has been the increased use of currency composites, including the SDR, that have yielded more continuous adjustments of exchange rates in line with variations in competitiveness. This trend toward the adoption of more flexible exchange arrangements continued in 1983 and the first quarter of 1984. Of the 18 members that changed their exchange arrangements in this period 5 ceased to peg their currencies (including one de facto peg) and adopted more flexible exchange rate arrangements. Another member that previously maintained its currency with limited flexibility against the U.S. dollar adopted a managed float. Four other members whose currencies were previously pegged to the U.S. dollar adopted currency composite pegs (the SDR in 2 cases), while 3 other members gave up pegging to the SDR basket and adopted currency composite pegs tailored to reflect more closely their particular trading patterns. Of 4 members whose changes involved reclassifications within the more flexible group, one (Australia) shifted from a managed float to an independently floating regime, one (Peru) moved from adjusting its currency on the basis of a set of indicators to a managed float but subsequently reverted to the previous arrangement of adjusting on the basis of a set of indicators, and one (Israel) reverted from an independently floating arrangement to a managed float. Only one member (Sierra Leone) changed from a more flexible exchange arrangement to pegging its currency to that of another member. However, the pegging was preceded by a large depreciation of the domestic currency in the official market and a simplification of the exchange system. Another feature of developing country Fund members in 1983 and in the first quarter of 1984 was the increased use of inflation differentials, alone or in combination with other factors, as an indicator for automatic or quasiautomatic adjustment of an otherwise pegged arrangement. As of the end of the first quarter 1984, 8 members had incorporated in their exchange arrangements a policy of periodic adjustment of the exchange rate to maintain international competitiveness according to such an indicator, while 5 other members undertook such a policy as part of a program supported by the use of Fund resources in 1983 and in the first quarter of 1984.

The aggregative impact of these changes was the following: The number of Fund members with more flexible exchange rate arrangements increased from 33 at end-1982 to 38 at end of March 1984 (of a total membership of 146).1 Single-currency pegged arrangements declined from 56 to 51 over the same period, while composite currency pegged arrangements increased from 38 to 39. Arrangements in the intermediate group of “Flexibility Limited” between pegged and flexible arrangements declined from 18 to 17. Since the inception of the present classification system, at end-1981, the proportion of Fund members with “More Flexible” arrangements has risen from 21 percent to 26 percent, and those with composite currency pegged arrangements from 25 percent to 27 percent. However, use by members of SDR pegs declined-from 10 percent to 7½ percent of the membership, as composites tailored to individual trade patterns were preferred.

At the end of March 1984, the currencies of 51 members were pegged to a single currency (33 to the U.S. dollar, 13 to the French franc, 2 to the South African rand, and 1 each to the Indian rupee, the pound sterling, and the Spanish peseta). Eleven currencies were pegged to the SDR and 28 to other currency composites. In all, therefore, 90 members had currencies classified under the “Pegged” category. Seventeen members maintained exchange arrangements classified in the “Flexibility Limited” category. Within this grouping 9 currencies were in the subclassification “Single Currency” (all against the U.S. dollar) as a result of having their exchange rates fluctuate within the equivalent of margins of 2¼ percent or less against an identifiable single currency of another member; the other 8 currencies as shown in Table 1 were those of countries maintaining cooperative arrangements under the EMS. Thirty-eight members maintained exchange arrangements in the “More Flexible” category; of these, 6 adjusted their exchange rates according to a set of indicators, 24 managed floating rates, and the currencies of 8 members floated independently.

Developments Affecting the Classification of Exchange Arrangements

During 1983, 16 members notified the Fund of changes in their exchange arrangements involving reclassification under the Fund’s classification scheme for exchange arrangements (the end-year classification is shown in Table 1).

Five of the reclassifications involved changes from a “Pegged” exchange arrangement to a “More Flexible” category. Ecuador informed the Fund of several changes to its dual exchange market arrangements consisting of an official and a free market. On March 19, the official exchange rate of the sucre was devalued and Ecuador announced that with effect from March 23, the sucre would be depreciated on a daily basis against the U.S. dollar at a rate equivalent to 2.9 percent a month. Ecuador was therefore reclassified from the category “Pegged: U.S. Dollar” to the “More Flexible: Other Managed Floating” category. Zaïre notified the Fund that, with effect from September 12, the fixed parity of the zaïre in terms of the SDR would be abolished, and that the official rate would be adjusted daily on the basis of the free market rate (which, effective October 4, 1983, would be determined on the interbank foreign exchange market). At the same time, Zaïre devalued the zaïre and introduced a transitional dual exchange rate regime comprising an official rate, at which sales of foreign exchange for official debt servicing, petroleum imports, and certain priority government transactions take place, and a free market rate for all remaining transactions. The dual exchange rate regime was to be so managed that the official rate would be maintained initially within 10 percent (within 5 percent effective October 14, 1983) of the rate in the free market (the major market); the official and free market rates were unified on February 24, 1984. Zaïre was reclassified from the category “Pegged: U.S. Dollar” to the “More Flexible: Other Managed Floating” category. Jamaica informed the Fund that, with effect from November 24, the pre-existing official, Caricom and parallel market rates had been unified into a single exchange rate. Since then the spot exchange rate has been fixed jointly by the commercial banks on a daily basis within a band prescribed by the Bank of Jamaica and reviewed on a fortnightly basis. Jamaica’s exchange arrangement was reclassified from the category “Pegged: U.S. Dollar” to the “More Flexible: Other Managed Floating” category. Following the devaluation of the Guinea-Bissau peso on December 23, Guinea-Bissau announced that the exchange rate in terms of the SDR would be adjusted flexibly by the National Bank on the basis of domestic price developments, external market conditions, export trends, and the overall balance of payments positions. On the basis of these changes, Guinea-Bissau was reclassified from the category “Pegged: SDR” to the category “More Flexible: Other Managed Floating.” Effective July 1, Somalia adopted a new exchange arrangement whereby the Somali shilling would be pegged to the SDR and would be adjusted for relative price developments in Somalia against the five countries included in the SDR basket. The exchange rate has been maintained within margins of ± 7.5 percent around the fixed relationship to the SDR adjusted for relative price developments; however, the exchange rate is re-evaluated when indicative margins of ± 2.25 percent are exceeded. The Somali shilling was reclassified from the category “Pegged: SDR” to the “More Flexible: Adjusted According to a Set of Indicators” category.

During the period under review, there were six reclassifications within the “Pegged” group. Four countries changed their peg from the U.S. dollar to either a composite currency peg or to the SDR peg, and the other 2 countries changed their peg from the SDR currency basket to another composite currency peg. Nepal announced that with effect from June 1, the Nepalese rupee would be pegged to a composite of several currencies reflecting Nepal’s trade pattern. On the basis of the new currency basket, the Nepal Rastra Bank has quoted daily the midpoint rate of the rupee for the U.S. dollar only. Previously, Nepal maintained exchange rates that were fixed in terms of both the U.S. dollar and the Indian rupee. In view of these changes, Nepal has been reclassified from the category “Pegged: U.S. Dollar” to “Pegged: Other Composite.” Romania notified the Fund of several changes in its exchange system. A unified commercial exchange rate was established on July 1 for all merchandise transactions in convertible currencies, as well as for a large proportion of service transactions and capital account transactions. In addition, the unified commercial rate was pegged to a basket of currencies of Romania’s principal trading partners in convertible currencies, with the U.S. dollar having a weight of 40 percent. Romania has accordingly been reclassified from the category “Pegged: U.S. Dollar” to “Pegged: Other Composite.” Rwanda announced that with effect from September 6, the Rwanda franc would no longer be pegged to the U.S. dollar, but to the SDR. Burundi informed the Fund that with effect from November 22, the Burundi franc would be pegged to the SDR and no longer to the U.S dollar. Reflecting these changes, Rwanda and Burundi were reclassified from the category “Pegged: U.S. Dollar” to “Pegged: SDR.” Mauritius announced that with effect from February 28, the Mauritian rupee would be detached from an SDR peg and instead pegged to a composite of several currencies reflecting mainly Mauritius’ pattern of trade. Zambia notified the Fund that with effect from July 6, the Zambian kwacha would also be detached from the SDR and pegged to a new basket of currencies reflecting Zambia’s trade with its major trading partners. On the basis of these changes, Mauritius and Zambia have been reclassified from the category “Pegged: SDR” to “Pegged: Other Composite.”

The exchange regimes of a further five countries were reclassified to or from the “More Flexible: Other Managed Floating” category. Australia informed the Fund that, with effect from December 12, the Reserve Bank would discontinue announcing indicative exchange rates for the Australian dollar in terms of the U.S. dollar, based on a trade-weighted currency basket and would permit the spot exchange rate for the dollar to be determined by the market. The Reserve Bank had ceased to quote the forward exchange rate with effect from October 30. Accordingly, Australia was reclassified within the “More Flexible” category from “Other Managed Floating” to “Independently Floating.” Peru notified the Fund that with effect from September 1, monthly rates of depreciation of the sol in terms of the U.S. dollar in the official market would be preannounced for three months in advance. In accordance with that policy, monthly rates of depreciation of the sol against the U.S. dollar were announced for the three months through November 1983. It was noted also that the official exchange rate for the sol would continue to be adjusted on a daily basis. However, as the set of indicators previously used would not determine these adjustments, Peru was reclassified within the “More Flexible” category from “Adjusted According to a Set of Indicators” to “Other Managed Floating.” Israel informed the Fund that it would maintain a policy of continuous adjustment of the exchange rate of the shekel in relation to a basket of currencies reflecting the composition of Israel’s foreign trade. On the basis of these changes, Israel was reclassified within the “More Flexible” category from “Independently Floating” to “Other Managed Floating.” Indonesia announced on March 30 that the rupiah was devalued and that the exchange rate would be managed flexibly in order to meet any unexpected external developments. Reflecting these changes, the Indonesian rupiah was reclassified from the category “Flexibility Limited Against a Single Currency” to the “More Flexible: Other Managed Floating” category. Sierra Leone notified the Fund that with effect from July 1 the official exchange rate was devalued and that the official and commercial exchange rates were unified. In addition, it was stated that the leone would be pegged to the U.S. dollar. Accordingly, Sierra Leone has been reclassified from the category “More Flexible: Other Managed Floating” to the category “Pegged: U.S. Dollar.”

Developments in Currencies of Industrial Countries2

No major changes occurred in the institutional arrangements of, or participation in, the EMS during the period under review. Pressures on exchange rates within the EMS reappeared, however, in 1983. A realignment of the parity grid took place on March 21. The realignment was the seventh since the EMS was established in March 1979 and the first in which the central rates for all the EMS currencies were adjusted: deutsche mark (+ 5.5 percent), Netherlands guilder (+ 3.5 percent), Danish krone (+ 2.5 percent), Belgium-Luxembourg franc (+1.5 percent), French franc (–2.5 percent), Italian lira (–2.5 percent), Irish pound (–3.5 percent). Changes in the ECU central rates showed the greatest depreciation for the Irish pound (3.6 percent), French franc (2.6 percent), and the Italian lira (2.6 percent); while the greatest appreciations were shown by the deutsche mark (5.4 percent) and the Netherlands guilder (3.4 percent). As with previous realignments, the changes had become necessary because of the continued differences in the underlying strength of the participating countries’ external positions that reflected, in turn, divergences in economic policies and cost-price performance. At the time of parliamentary elections in the Federal Republic of Germany and municipal elections in France on March 6 there had been downward pressure on the French franc and upward pressure on the deutsche mark. The French franc required support at its lower intervention point and pressure did not ease until the realignment on March 21. In May, to support the French Government’s stabilization measures, the European Commission was authorized to arrange borrowings on international markets under the Community loan mechanism, for onlending to the Republic of France. The arrangements, for medium-term finance, amounting to the equivalent of ECU 4 billion, were completed in July and August.

During 1983, the U.S. dollar appreciated against all other currencies of the industrial countries except the Japanese yen (Table 2). The yen showed a slight appreciation (1.2 percent on an end-year basis) against the U.S. dollar. France (19.4 percent) registered the largest depreciation against the U.S. dollar, while Canada showed the least depreciation (1.2 percent) against the U.S. dollar. A striking feature of exchange market developments during most of 1983 was therefore the continued strength of the U.S. dollar. After having appreciated by 10.4 percent in nominal effective terms3 in 1982, the U.S. dollar rose by a further 9.4 percent in 1983—influenced by a reduction in the rate of domestic inflation, improvements in the profitability of business investment and growth, relatively high interest rates on dollar-denominated assets, and, to some extent, by unsettled economic and political conditions elsewhere in the world. Between February and August, the dollar advanced against most major currencies, offsetting by varying degrees some previous weakening around the turn of the year. The dollar reached a record level in terms of the SDR in August, and then depreciated gradually in September and October, although regaining its August level by the end of the year.

Table 2.Exchange Rate Movements of Currencies of Industrial Countries with “Cooperative” or “Independently Floating” Arrangements(December 31, 1982–December 31, 1983)
Exchange Rate (Currency Units per US$) (End of Period)MERM Index (1975 = 100)Percentage Appreciation (+)/ Depreciation (−)
Against US$MERM
AustraliaDec. 31, 19821.0197885.25−8.02−2.8
(dollar)Dec. 31, 19831.1086582.86
Belgian/LuxembourgDec. 31, 198246.9293.58−15.7−4.8
(franc)Dec. 31, 198355.6489.13
CanadaDec. 31, 19821.229489.36−1.2+3.1
(dollar)Dec. 31, 19831.244492.11
DenmarkDec. 31, 19828.38484.43−15.1−6.9
(krone)Dec. 31, 19839.875078.57
FranceDec. 31, 19826.72575.06−19.4−11.4
(franc)Dec. 31, 19838.347566.49
Germany, Fed. Rep. ofDec. 31, 19822.3765128.57−12.8−3.0
(deutsche mark)Dec. 31, 19832.7238124.66
IrelandDec. 31, 19820.716175.96−18.7−10.4
(pound)Dec. 31, 19830.881168.06
ItalyDec. 31, 19821,370.053.41−17.4−8.5
(lira)Dec. 31, 19831,659.548.87
JapanDec. 31, 1982235.00144.19+1.2+8.7
(yen)Dec. 30, 1983232.20156.71
NetherlandsDec. 31, 19822.625119.18−14.4−4.0
(guilder)Dec. 31, 19833.065114.46
United KingdomDec. 31, 19830.6193983.95−10.2−1.2
(pound sterling)Dec. 31, 19830.6893782.93
United StatesDec. 31, 1982. . .118.39. . .+9.4
(dollar)Dec. 31, 1983129.51
Source: International Monetary Fund, International Financial Statistics.

There were sizable movements in the effective exchange rates of the currencies of most industrial countries in 1983. In effective (MERM) end-of-year terms, the largest appreciations were recorded by the U.S. dollar and the Japanese yen (9.4 percent and 8.7 percent, respectively). Canada was the only other industrial country to register an appreciation of its currency in effective terms (3.1 percent) during the period under review. The largest depreciations in effective terms were recorded by France (11.4 percent), Ireland (10.4 percent), and Italy (8.5 percent).

Other Developments in Exchange Rate Arrangements

In the course of 1983, a number of modifications of exchange arrangements (over 40) that did not entail a change in the Fund’s classification of the arrangements were notified to the Fund. These modifications involved, in the main, discrete adjustments in the exchange value of pegged and flexibly determined currencies. A few instances involving changes in the mode or pace of change of preannounced exchange rates, adjustments of currency baskets determining the exchange value of currencies (without necessarily involving a change in the level of the peg), and adjustments of margins about the peg were also notified to the Fund.

As in 1982, all countries with pegged currencies that changed their exchange rates devalued. Those with currencies linked to the U.S. dollar or to currency composites with a heavy dollar weight effected devaluations because of the strength of the U.S. dollar and domestic policy considerations. In other instances, devaluations were undertaken in order to correct for real appreciations that had taken place over a number of years. Other members lowered the international value of their currencies on a regular basis, with some being guided by an explicit set of indicators; these members included a small number that preannounced their exchange rates with a view to reducing uncertainty and to affecting inflationary expectations. The magnitudes of the devaluations tended to be smaller for countries with composite currency pegs.

Among those members with pegged currencies that devalued in 1983, Bangladesh changed its intervention currency to the U.S. dollar on January 11, to a mid-rate of Tk 24.50 = US$1, representing a depreciation of 0.6 percent against the U.S. dollar (Table 3). On November 21, Bolivia altered the value of the peso to a mid-rate of $b 505.1 = US$1 representing a 60.8 percent devaluation against the U.S. dollar. Effective November 22, Burundi adopted an SDR peg and set the value of the Burundi franc at FBu 122.70 = SDR 1, entailing a 22.9 percent depreciation against the U.S. dollar. Ecuador changed the official exchange rate to S/. 42.00 = US$1 on March 19, which represented a 21.4 percent depreciation, and announced that the exchange rate would be depreciated daily by S/. 0.04 per US$1, with effect from March 23. With effect from December 23, the Guinea-Bissau peso was devalued from PG 44 = SDR 1 to PG 88 = SDR 1, representing a devaluation of 50 percent against the SDR. Hungary depreciated the value of the forint on several occasions in 1983, representing depreciations of 1 percent (March), 3 percent (April), 1 percent (June), and 3 percent (July) against the basket of currencies to which it is pegged. On May 18, Jamaica established a special exchange rate of J$ 2.25 = US$1 for all transactions within the Caricom countries except for those previously designated (primarily imports of basic foods for Caricom countries) for payment at the official exchange rate of J$ 1.78 = US$1. The special rate of J$2.25 = US$1 represented a 20.9 percent depreciation of the exchange rate applicable to those transactions previously carried out in the official market. With effect from November 24, Jamaica unified the pre-existing official, Caricom and parallel market rates into a single exchange rate which was initially set at J$3.125 = US$1. Kenya devalued the shilling by 2.5 percent against the SDR on July 18. Madagascar devalued the Malagasy franc on three occasions in 1983, representing depreciations of 5.7 percent (January), 2.0 percent (July), and 9.5 percent (October) against the currency composite to which it is pegged. Malawi depreciated on September 17 the rate of the Malawi kwacha in terms of the SDR by 10.7 percent. On June 1, Nepal pegged the Nepalese rupee to a composite of several currencies and depreciated the Nepalese rupee by 1.4 percent against the U.S. dollar. Papua New Guinea devalued its currency by 5.5 percent against a basket of currencies on March 8. Romania devalued the commercial exchange rate of the leu by 9.1 percent against the U.S. dollar on January 1, and by 5.7 percent against the U.S. dollar on July 1, when it adopted a composite currency peg. In addition, the noncommercial rate for the leu was devalued by 7.4 percent against the U.S. dollar on July 1. While adopting an SDR peg, effective September 6, Rwanda devalued its currency by 5.2 percent against the U.S. dollar. On July 1, Sierra Leone unified the official and commercial exchange rates at Le 2.5 = US$1, representing a 49.7 percent devaluation of the official rate. Tanzania devalued the shilling by 20 percent against the U.S. dollar on June 6. Venezuela introduced the following three markets effective March 5: (1) a market in which the previous exchange rate of Bs 4.30 = US$1 is used for revenue of oil exports, payments for essential imports and for external public debt; (2) a market in which the exchange rate of Bs 6.0 = US$1 is used for some revenues from state enterprises, imports of raw materials, and intermediate goods; this represented a depreciation of 28.3 percent against the U.S. dollar; and (3) a market in which a managed floating exchange rate is used for tourism, private transfers, and capital flows. On September 12, Zaïre changed the official exchange rate from Z 1 = SDR 0.15750 to Z 1 = SDR 0.03542 representing a devaluation of 77.5 percent. Effective January 9, Zambia depreciated the kwacha by 20 percent against the SDR. On July 6, the kwacha was depreciated by 1 percent against its intervention currency, the U.S. dollar.

Table 3.Changes in Exchange Rates of Currencies Pegged to Single Currencies or Currency Composites, 1983
CountryDate of ChangePegDomestic Currency Units per U.S. Dollar or per SDR1Percentage Appreciation (+)/Depreciation (–) (in Terms of U.S. Dollar, SDR, or Currency Composite)1
Old rateNew rate
Bangladesh (taka)Jan. 11Other composite. . .. . .−0.62
Bolivia (peso)Nov. 21U.S. dollar196.0500.0−60.8
Burundi (franc)Nov. 22U.S. dollar390.00−22.9
Ecuador (sucre)Mar. 19U.S. dollar333.042.0−21.4
Guinea-Bissau (peso)Dec. 23SDR344.088.0−50.0
Hungary (forint)Mar. 1Other composite. . .. . .−1.0
Apr. 8Other composite. . .. . .−3.0
June 7Other composite. . .. . .−1.0
July 12Other composite. . .. . .−3.0
Jamaica (dollar)May 18U.S. dollar1.7842.254−20.9
Nov. 24U.S. dollar33.12
Kenya (shilling)July 18SDR14.06000014.417241−2.5
Madagascar (franc)Jan. 31Other composite. . .. . .−5.7
July 8Other composite. . .. . .−2.0
Oct. 3Other composite. . .. . .−9.5
Malawi (kwacha)Sept. 17SDR1.21221.3577−10.7
Nepal (rupee)June 1U.S. dollar314.3014.50−1.4
Papua New Guinea (kina)Mar. 8Other composite. . .. . .−5.5
Romania (leu)Jan. 1U.S. dollar15.0516.55−9.1
July 1U.S. dollar316.5517.55−5.7
Rwanda (franc)Sept. 6U.S dollar392.8497.9−5.2
Sierra Leone (leone)July 1U.S. dollar61.2572.500−49.7
Tanzania (shilling)7June 6Other composite9.743212.178752−20.02
Venezuela (bolívar)Mar. 5U.S. dollar4.386.0−28.3
Zaïre (zaïre)Sept. 12SDR0.157500.03542−77.5
Zambia (kwacha)Jan. 9SDR0.9763110.781049−20.0
July 6Other composite61.2109521.212152−1.02

One member that maintained the exchange rate of its currency with limited flexibility in terms of another currency notified the Fund of a dcscrete adjustment of the rate in 1983. Effective April 22, Ghana introduced a multiple exchange regime through a system of surcharges and bonuses applied to the official rate (Ȼ 2.75 = US$1) by banks and other authorized foreign exchange dealers resulting in two effective rates of Ȼ 23.375 = US$1 and Ȼ 29.975 = US$1 equivalent to 88.2 percent and 90.8 percent devaluations of the cedi against the U.S. dollar, respectively. On October 10, Ghana abolished the bonuses and surcharges and unified the exchange rate, setting it at Ȼ 30.0 = US$1, which represented a further depreciation against the U.S. dollar of 17.7 percent of the implicit average exchange rate of Ȼ 24.692 = US$1 that was in effect since April 22.

Changes in exchange rates in 1983 of currencies subject to “More Flexible” arrangements are shown in Table 4. Several countries with “Managed Floating” of their currencies, announced discrete changes in the external value of their currencies. With effect from March 8, Australia devalued its currency by 10 percent against a trade-weighted basket of currencies. With effect from November 14, Costa Rica unified the banking and free exchange rates and set the banking rate initially at Ȼ 43.65 = US$1 (selling), representing a depreciation of 4.4 percent for the banking rate. Greece announced a devaluation of the Greek drachma by 15.5 percent against the U.S. dollar effective January 9. During 1983, the Greek drachma depreciated by 28.5 percent against the U.S. dollar. Iceland announced a 9 percent devaluation of the Icelandic króna effective January 5, and a further 14.6 percent devaluation of the Icelandic króna on May 27. During 1983, the Icelandic króna depreciated by 42 percent against the U.S. dollar. Indonesia changed the value of the rupiah on March 30, from Rp 702.50 = US$1 to Rp 970.00 = US$1, representing a devaluation of 27.6 percent against the U.S. dollar. On August 10, Israel increased the selling price, in shekels, of the U.S. dollar by 7.5 percent and by a further 23.5 percent on October 11. During the year under review, the shekel depreciated by 68.8 percent against the U.S. dollar. Following the devaluation of the Australian dollar, New Zealand announced the devaluation of the New Zealand dollar by 6 percent effective March 8. In 1983, the New Zealand dollar depreciated by 10.7 percent against the U.S. dollar. Peru announced that, effective August 8, the buying rate of the sol in the official market was changed from S/. 1,743 = US$1 to S/. 1,850 = US$1, representing a 5.8 percent depreciation. During 1983, the Peruvian sol depreciated by 56.4 percent against the U.S. dollar. Philippines announced that, with effect from October 5, the peso was devalued from ₱ 11.0015 = US$1 to ₱ 14.00 = US$1, representing a 21.4 percent devaluation against the U.S. dollar. During the year under review, the Philippine peso depreciated by 34.5 percent against the U.S. dollar. Western Samoa announced several changes in the exchange rate of the tala. With effect from February 7, the midpoint exchange rate for the tala in terms of the New Zealand dollar was changed from WS$0.9062 = $NZ 1 to WS$ 1.0069 = $NZ 1, representing a 10 percent depreciation of the tala. During the second quarter of 1983, the midpoint exchange rate of the tala against the New Zealand dollar was changed on several occasions representing a 5 percent depreciation of the tala against the New Zealand dollar during the second quarter. During 1983, the tala depreciated overall by 23.6 percent against the U.S. dollar.

Table 4.Changes in Exchange Rates of Currencies Subject to “More Flexible” Arrangements1(December 31, 1982–December 31, 1983)
Currency Units per U.S. Dollar2 (End of Period)Percentage Appreciation (+)/Depreciation (–) (in Terms of U.S. Dollars per Currency Unit)
Dec. 31, 1982Dec. 31, 1983
Argentina (peso)4.854523.261−79.1
Brazil (cruzeiro)252.67984.00−74.3
Chile (peso)73.4387.53−16.1
Colombia (peso)70.2988.77−20.8
Costa Rica (colón)40.2543.65−7.8
Ecuador (sucre)33.1554.64−39.3
Greece (drachma)70.5798.67−28.5
Iceland (króna)16.62528.67−42.0
India (rupee)9.63410.493−8.2
Indonesia (rupiah)692.5994.0−30.3
Israel (shekel)33.65107.77−68.8
Korea (won)748.8795.5−5.9
Lebanon (pound)3.815.49−30.6
Mexico (peso)96.48143.8−32.9
Morocco (dirham)6.267558.0610−22.3
New Zealand (dollar)1.3651.528−10.7
Nigeria (naira).6702.7486−10.5
Pakistan (rupee)12.847813.50−4.9
Peru (sol)989.672,272.20−56.4
Philippines (peso)9.17114.002−34.5
Portugal (escudo)89.064131.646−32.4
Spain (peseta)125.601156.7−19.8
Sri Lanka (rupee)21.3225.00−14.7
Somalia (shilling)15.20717.5556−13.4
South Africa (rand)1.0741.221−12.0
Turkey (lire)186.75282.8−34.0
Uganda (shilling)104.3240.00−56.5
Uruguay (new peso)33.75043.25−22.0
Western Samoa (tala)1.2371.6203−23.6
Yugoslavia (dinar)62.487125.673−50.3
Zaïre (zaïre)5.7463330.118−80.9

Countries that follow an explicit set of indicators in managing their exchange rates flexibly4 effected the following cumulative rates of depreciation in 1983 against their intervention currency, the U.S dollar: Brazil 74.3 percent; Chile 16.1 percent; Colombia 20.8 percent; Portugal 32.4 percent; and Somalia 13.4 percent. These cumulative depreciations were achieved in part by discrete devaluations. Brazil devalued the cruzeiro 12 times against the U.S. dollar during the first quarter of 1983, including a substantial devaluation of 23.1 percent in terms of cruzeiros per U.S. dollar on February 21. Chile announced that with effect from March 23, the reference rate of the Chilean peso would be adjusted on the basis of domestic inflation only. Previously, from September 29, 1982, the exchange rate of the peso had been adjusted daily by the difference between the average rate of change of the domestic consumer price index in the preceding month and an estimate of the world inflation rate. Since December 17, however, foreign inflation, estimated at not more than 0.5 percent a month, has been taken again into account. Following the realignment of the currencies participating in the EMS, on March 25, Portugal announced a 2 percent adjustment in the effective exchange rate of the escudo and a monthly increase in its crawling peg depreciation, from 0.75 percent to 1 percent. Further, on June 22, Portugal announced a devaluation of the escudo in effective terms of 12 percent. On October 23, Somalia changed the middle rate of the Somali shilling from So. Sh. 15.7567 = US$1 to So. Sh. 17.5556 = US$1, representing a 10.2 percent devaluation.

Modifications were made by countries to the issuance of advance announcements of exchange rates, affecting the mode and pace of change of the exchange rates of their currencies. Following the devaluation of the sucre in the official market on March 19, Ecuador announced that the exchange rate of the sucre would be depreciated by S/. 0.04 per US$1 each business day, with effect from March 23; the rate of depreciation of the sucre in the official market was accelerated after June 19, 1983 to S/. 0.05 per US$1 each calendar day. Subsequent to the devaluation of the official exchange rate of the sol on August 8, Peru announced that with effect from September 1, monthly rates of depreciation of the sol in terms of the U.S. dollar in the official market would be preannounced for three months in advance. In accordance with that policy, monthly rates of depreciation of the sol in terms of the U.S. dollar of 3.9, 3.8, and 3.6 percent were announced for the three months through November 1983. The December depreciation rate (3.5 percent) was announced in September, the January 1984 rate (4.4 percent) in October, and that for February 1984 (4.7 percent) in November. In late December the Peruvian authorities announced that no further preannouncements would be made for the period after February 29, 1984. Following the depreciation of the escudo on March 25, Portugal announced an increase in its monthly crawling peg depreciation from 0.75 percent to 1.0 percent.

During the period under review, several exchange arrangement changes other than those already noted were introduced, including an adjustment of margins around a peg, the introduction of a new currency, and a change of intervention currency. On May 31, Argentina announced that, following bank and foreign exchange holidays on May 31 and June 1, a new monetary unit would be in effect. The name of the new unit would be the peso argentino ($a), with a value equal to 10,000 of the former peso. Effective January 11, Bangladesh changed its intervention currency from the pound sterling to the U.S. dollar. Following the depreciation of its currency on July 18, Kenya announced that it was availing itself of margins of ± 2.25 percent around the Kenya shilling–SDR peg.

No information is available on Democratic Kampuchea.

Refers to the classification of countries as given in the Fund’s International Financial Statistics. Industrial countries comprise: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United Kingdom, and the United States.

Based on the Fund’s multilateral exchange rate model (MERM), in which the implicit weighting structure takes account of the relative importance of a country’s trading partners in its direct bilateral relationships with them, of competitive relationships with “third countries” in particular markets, and of estimated elasticities affecting trade flows.

Changes in exchange rates in 1983 of currencies subject to “More Flexible” arrangements are shown in Table 4.

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