I. Introductory Note

International Monetary Fund. External Relations Dept.
Published Date:
September 1963
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During the past year the balance of payments and reserve positions of most industrial countries, in particular in continental Europe, remained fairly strong, and many of these countries took further steps to relax their restrictions on international payments. The United States, however, continued to have a balance of payments deficit. The substantial deficit that had developed in Japan’s balance of payments during 1961 continued in the early months of 1962, but it was eliminated and followed by a surplus in the course of the year as the Government applied general measures of fiscal and credit policy to redress the balance of payments without abandoning its program of trade and exchange liberalization. Severe pressures on the Canadian balance of payments during the second quarter of 1962, mainly attributable to capital flows stimulated by confidence factors, were quickly overcome when the Fund and institutions in the United States and the United Kingdom made a total of $1,050 million available to the Canadian authorities to replenish reserves. Apart from certain temporary trade restrictions, the Government relied on general measures of economic policy to meet the critical balance of payments situation.

Among the underdeveloped countries, some experienced an improvement in their balance of payments positions, enabling them to reduce restrictions on payments. Many of them, however, still had difficult balance of payments problems—because of such factors as rapid development and growth, a deterioration in their terms of trade, inflation, and other causes—and continued to apply exchange and import restrictions, or introduced additional restrictions, in an attempt to avoid undue pressure on the exchange rate and a drain on reserves. Inflationary pressures led some countries, such as Argentina and Chile, to allow the exchange rate to adjust to a realistic level.

There was further development in the cooperation among industrialized countries during the past year to counter pressure on their foreign exchange markets and to defend the convertibility of their currencies. The Fund’s decision of January 5, 1962 on general arrangements by which it might borrow supplementary resources to help maintain the international monetary system was reported fully in the Fund’s Annual Report for 1962.1 These arrangements have now entered into force, and nine of the ten expected participants have notified their adherence to them. The existence of these additional resources, along with the further strengthening of inter-central-bank cooperation, greatly added to confidence in the ability of participating countries to cope with major strains in the international monetary system, and thus reduced adverse speculation in the international exchange markets.

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