Statements Bearing on Fund Policy, Delivered at the Annual Discussion of the IBRD, IFC, and IDA 1
- International Monetary Fund. Secretary's Department
- Published Date:
- November 1964
Statement by the Governor of the Bank for France—Valéry Giscard d’Estaing
. . . Twenty years after the creation of our institutions, promoting economic development and international monetary equilibrium is still a major concern of the community of nations. The Bank and the Fund are to be commended for unceasingly intensifying and diversifying their activities during this period. But the institutions created at Bretton Woods were not asked to provide one final and unchangeable solution for one specific problem; their task was to continue to contribute both to the growth and to the stability of the world economy, throughout the difficulties that would inevitably arise.
In order to fulfill this mission, our institutions had to call on intellectual as well as physical and financial resources. Some kinds of progress can be achieved only through analytical and creative thinking. This type of contribution is particularly needed at the present stage of development of the world economy. In recent years, our efforts have been concentrated on mobilizing resources to accelerate the development of nations which are in the process of industrialization. This will be the first point of my remarks.
But, I believe that the functioning of the international monetary system, which is the main problem to be reviewed this year, requires a special effort of intellectual insight. . . .
The examination of the problems raised by the equilibrium and functioning of the international monetary system has to be made broader and still more accurate. Last year we stressed the usefulness of this study.
Since then, a thorough analysis of the international monetary system has been made by both the Board of Directors of the Fund and by the Group of Ten. These two organizations have performed a useful task. They have provided us with a better knowledge of the functioning of the international monetary system which has led to constructive recommendations.
Generally speaking, it has been agreed that there was no need to modify the Articles or the policies of the Fund. On the other hand, it has appeared necessary to scrutinize the kinds of cooperation existing at the present time among the main currencies. From this point of view, the small Group of Ten has proved to be a particularly apt study group, and its report is of special interest.
As might be expected, the conclusions of the Group of Ten are the result of a compromise. We accepted them in a spirit of conciliation, while putting these conclusions in the light of what we, on the French side, consider to be the essential objectives.
I will recall them here, with candor, clarity, and simplicity.
The present system of international payments is an empirical creation. Empirical schemes have their own merit, since they necessarily result from an adaptation to the pressure of circumstances. But there is no evidence that such schemes can spontaneously take on a form that will permit them to meet, over a period of time, the requirements of the situation to which they are applicable.
Such is the case in regard to the present gold exchange standard. Although, as has been emphasized, this standard has been able to meet, with limited adjustments, the needs of a period of exceptional world economic expansion, it has nevertheless shown some signs of inadequacy and deviation recently, and the least we can say is that it has not prevented the inflationary trends which, during the last few years, have affected large areas of the industrial world.
These inadequacies and deviation may be explained by the serious imperfections in a system which allows the reserve currency countries to finance lasting balance of payments deficits without the creditor and debtor countries being fully aware of this fact and without the adequate corrective mechanisms being necessarily implemented in due time.
In this way, excessive facilities may be granted which may lead to the spreading of international inflation. It may even lead to the strange paradox that, since this system in practice permits the deficits of the reserve currency countries to be financed without limit, the creditor countries are somehow invited to “create a deficit” in order to compensate for the outflow of reserve currencies, which is a phenomenon for which they have no responsibility whatever.
Moreover, as was excellently stressed yesterday by the Governor for the Netherlands, the creation of owned reserves should clearly not be linked to changes in the balances of payments of the reserve currency countries. There may very well be no relationship between the amount of the reserves which is deemed desirable and the positive or negative trend in the external settlements of a country, important as this may be. In the same way, there may very well exist no concordance of interest between the national policy of a country which, for quite justifiable reasons, tries to curtail its money supply, and the total amount needed for owned reserves in the world economy.
The imperfections of the present system lead us to hope that it will develop in a way which, from our point of view, would be as follows:
The world monetary system must be set in concentric circles: the first one being gold, and then, the second, if necessary, recourse to deliberate and concerted creation of either reserve assets or credit facilities.
The inner circle is gold.
Experience in recent years has shown us that, aside from any theoretical preference, gold remains the essential basis of the world payments system.
This is true at the psychological level. Indeed, public opinion, by a kind of universal consensus, attaches a very high price to gold; it is even sometimes inclined to reappraise its judgment in regard to the strength of the various currencies in relation to changes in the gold holdings in their reserves. This is also true of governments, and in proof of this, it is sufficient to allude to the problems raised by the reserve currency countries regarding the conditions affecting gold tranche subscriptions on the occasion of the next increase of Fund quotas.
The importance of the role of gold does not arise from any charm inherent in the metal itself, but from the following fact: as long as the present situation prevails, with separate national sovereignties throughout the world acting freely in the monetary field, without recourse to arbitration, and certainly not subject to coercion, reference will have to be made to gold, the only monetary element outside the scope of government action.
While noting the basic role of gold, we do not believe that the pace at which it is mined will spontaneously adjust its volume to the needs of a world, the rapid technological transformation of which may be observed here more clearly than anywhere else.
Thus it may be necessary to seek out supplementary sources for supplying owned reserves.
The basic distinction has rightly been made between credits for balance of payments support, such as those so usefully granted by the Fund under M. Schweitzer’s inspiring management, and the creation of fiduciary means for supplying reserve assets.
Internally, the action of the Fund might be compared to that of a bank which grants credits to help its customers bridge over temporary difficulties. On the other hand, the creation of reserve assets would be akin to the role of a central bank whose operations are geared to the general needs of the economy.
If and when fiduciary means must be added to gold, they should be issued in accordance with objective rules and through mutually undertaken action.
I do not wish, at this juncture, to discuss the technicalities of such a system nor the choice of the appropriate administrative body. In my mind, three considerations should underlie the studies to be made on this subject:
(1) If such reserve assets are, over the long run, to be added to, and possibly substituted in part for gold in its present function, they must be of an objective nature, governed by strict rules concerning their creation and volume.
(2) As there is always temptation to accumulate an oversupply of world liquidities, cautious regulations would be required in order to assess the need for such a creation and to adjust its amount.
(3) The group of those with whom would rest the responsibility and burden for such operations should act in close cooperation with the Fund and with due regard to the interest of the world community as a whole.
To sum up: first, under present circumstances, gold remains, in our minds, the basis of the international payments system.
Secondly, if the need were to arise for an increase in the amount of owned reserves, there should be a concerted and limited recourse to additional fiduciary means, instead of to the uncertainties and instabilities of the gold exchange standard. Such a substitution should be brought about gradually and not by disrupting the present system which, under present circumstances, provides an adequate safeguard for the functioning of international payments. Indeed, it is normal that various central banks will go on keeping, in their reserves, dollars, pounds sterling, or French francs, owing to the particular financial relationship they maintain with the countries issuing such currencies.
Having thus set forth our general views regarding the future of the international monetary system, it seems to me that the spirit in which we envisage the implementation of the two main practical recommendations of the Group of Ten, namely, the establishment of a multilateral surveillance and the increase in Fund quotas, will be readily understood.
(1) Multilateral surveillance appears to us an essential step toward straightening out the international monetary system. It should give us the means of avoiding the misuses which may occur within the framework of the gold exchange standard. Indeed, the noticeable reduction of the U.S. payments deficit has lessened the worrying aspect of the situation which prevailed in this field a year ago. But what has happened once may happen again, and, generally speaking, we must avoid the use of short-term facilities to finance deficits which are actually of a more lasting nature.
Implementation of this surveillance will call for much caution, but also for much candor. Much caution, because these are delicate operations involving the functioning of the exchange market and may give rise to serious psychological reactions. Much candor, since, obviously, the system would be hampered from the start if governments or central banks permit their partners to ignore major developments which might affect the functioning of the international monetary system.
(2) To be quite frank, the new increase of the Fund’s quotas which is recommended by both the Board of Directors of the Fund and by the Group of Ten did not seem to us to respond to an evident and urgent need. We have never concealed the fact that we do not consider the increase of international liquidities to be the main target of the studies which have been undertaken. However, nobody could pretend that the Fund’s resources should remain fixed at the level established five years ago. Since we have the opportunity, under the quinquennial review, to reconsider the level of Fund quotas, we are willing to go along with a moderate increase of quotas, which should not exceed 25 per cent. Of course, if some individual quotas have to be adjusted, these adjustments should be limited to cases where the present quotas are clearly out of line with the economic situation of the countries concerned.
The principle of the payment in gold of 25 per cent of the increase should be firmly maintained. In our opinion, this quota increase could be implemented, for instance, in two stages: the first one taking place just after the parliamentary ratification of the final decisions; the second one, for instance, one or two years later.
The implementation of this set of measures is a step in the evolution of the world monetary system toward a more rational and realistic structure. We will make our contribution both to implementing those measures and to carrying on actively the studies which will prolong them.
* * *
The process of life is indeed slow; but, even so, it seems that one of the features of our times is that the pace of facts is nearly always ahead of the pace of thought.
The monetary matter is too important, its management may be too dangerous or too rewarding, for us to leave this field—a product of man’s ingenuity—as one in which thought would not precede and master the facts. . . .
Statement by the Governor of the Fund and Bank for Australia—Harold Holt
… I turn now to Fund matters under discussion. I can indicate quickly and briefly Australia’s attitude to them. We support an increase in Fund quotas. We agree that the Executive Directors should be asked to prepare proposals for concrete action both to raise the quotas of the Fund as a whole and to introduce special additional quota increases for countries whose present quotas are out of line. It would also be the Australian view that the Executive Board, in formulating such proposals, should consider the problems that full payment in gold of 25 per cent of any increase in quota might present for many members.
On the more general question of considering possible reform of the present monetary system, Australia would support Mr. Schweitzer in his opinion that the advantages of the multilateral institutional approach are of particular importance. All member governments represented here have a direct interest in this matter, and the Fund is the forum where a balanced consideration can best be given to problems in the international monetary field as they affect all countries. We note with satisfaction that there is much in the report of the Group of Ten which coincides with the views of the Fund. We welcome acceptance by the Group of Ten of the need for an increase in Fund quotas. Much of what one would wish to say on the Bank and Fund Reports and on the operation of the international monetary system has been well expressed by earlier speakers and I wish to spare the Governors tedious repetition.
I do wish, however, to dwell on one topic which, having regard to its importance, has been given inadequate attention in the reports both of the Fund and of the Ten. That is the question of gold. Perhaps it is thought that its relationship to the international monetary system is so well known as to require little elaboration. But the Fund Report covers the first thoroughgoing review of the functions of the international monetary system made after twenty years of operation. This review remains incomplete without a full analysis of the place of gold in the system. In any discussion on international liquidity, the place of gold, the price of gold, and the adequacy of supply of gold should all receive attention appropriate to their importance. The Governor for France stressed the importance of the place of gold.
The present international monetary system is largely based on gold. Gold makes up the major part of total international reserves. It is significant in this context that the major industrialized countries, particularly those of Europe, firmly and persistently retain the largest proportion of their reserves in gold, and there is apparently an undiminishing demand for the metal for this purpose. The Fund requires each of us to supply a substantial proportion of its assets in gold. Yet in our studies of the problem of international liquidity and possible means of ensuring that it will increase sufficiently in the years ahead, it seems to be assumed far too readily that the supply of gold will prove adequate to needs and that the price of this metal, fixed at $35 to the ounce thirty years ago, should be held at that value. There has been no discussion in the Reports whether steps should be taken to increase the supply of the metal that provides the foundation, as well as the greater part, of international liquidity at present. On page 102 of the Fund Report for 1964, there is a table of the value of world gold production, gravely disturbing in its implications. It illustrates the dramatic decline in gold production in almost every country of the world since 1940. If we leave South African production out of the table, we find that the value of free world production of gold has slumped from $772 million in 1940 to $399 million in 1963. Some may take comfort from the fact that the total value of free world production has moved from $1,264 million in 1940 to $1,360 million in 1963. An increase of this dimension in the production value of any commodity would be regarded as modest enough over an interval of twenty-three years, but detailed examination reveals that, with the notable exception of South Africa, whose value of production increased spectacularly over that period from $492 million to $961 million, of the remaining ten major producing countries listed, only one, Ghana, has shown an increase, and this only a marginal movement from $31 million to $32 million. The combined value of all the others has shown a sharp decrease. Of the countries not listed individually but grouped under the heading “other,” the value of production has declined from $157 million to $65 million.
We would have been discussing this question of international liquidity much earlier if gold reserves had not been propped up by South African production, which has more than doubled in value over the past ten years. But even in relation to that source of supply, the Fund Report has a somber comment. It says on page 103 that “South African production will have nearly reached its peak in 1964 or 1965. Thereafter it may level off for a few years, and subsequently decline.”
It must be assumed from their reports that neither the Fund nor the Group of Ten contemplates any change in the price of gold. It remains to be seen how long this commodity can be held at a price fixed thirty years ago. It is against nature to hold it there unchanged indefinitely, regardless of general cost and price movements, and for my own part, I think we merely increase the difficulties of adjustment, the longer an adjustment is delayed. However, whatever views we may hold on that aspect, we clearly need a comprehensive and up-to-date study by the Fund of the causes of the decline in gold production in so many countries, and an examination of methods whereby the supply of a metal fundamental to the liquidity of the international monetary system can be substantially augmented. I would hope that by the time of our next meeting, such studies would not only have been put in hand, but their results made available to us early enough for a more searching discussion then. . . .
Statement by the Governor of the Fund for Cameroon—Victor Kanga
. . . We have received and examined with keen interest the Annual Reports of both the Bank and the Fund which were sent to us. We are happy to follow the example of the preceding speakers in extending our hearty congratulations to you and to all who have collaborated with you in the vast work whose high caliber can be measured only by the qualifications and competence of those who have contributed to its realization. The conclusions drawn from the Reports of the Fund and the Bank confirm my country’s faith in international monetary and financial solidarity or, briefly, in cooperation among men.
The assistance which these monetary and financial institutions provide to developing countries is constantly increasing, as is the number of newly independent countries which are becoming members of them. . . .
This international monetary and financial assistance functioned almost without difficulties for a long time when almost all of it was being directed only to the industrialized countries. But with the advent of the young member countries, particularly the African countries, it appeared that the machinery set up by the IMF and the IBRD was not always adapted to the needs of the underdeveloped countries. This undoubtedly explains the reactions and perhaps the anxieties shown vis-à-vis these institutions at the recent United Nations Conference on Trade and Development, which has with good reason been referred to so frequently at these meetings.
We believe that strict banking principles should be the golden rule of sound management in the financial sphere. For this reason Cameroon has tried, by a policy of financial austerity, to balance its current budget without resorting to new fiscal measures. Similarly, in regard to our foreign trade, we wish to point out that our trade balance has been favorable for more than three years, or more precisely, since one year after our independence.
However, while recognizing that the credit of the Fund and the Bank comes from their strict and sound management, it seems nonetheless desirable that they be given a new orientation. This new orientation should, among other things, consider not only Bank or Fund aid on large-scale projects, but also the area of small and medium industry, since most of our young States are predisposed, because of their low population density or the relative size of their territory, to carry out their expansion within the framework of medium-scale economic development.
It should be noted here, however, that in order to remedy this situation we have formed a regional grouping within the framework of a customs and monetary union of the Equatorial area comprising Congo (Brazzaville), Gabon, the Central African Republic, Chad, and Cameroon. This union is strengthened even more by the harmonization of development plans, taxes, and the creation of common regional industries.
The need for this reorientation has not escaped the notice of the Fund and the Bank authorities who, in their recent talks in Geneva during the above-mentioned conference, and also right here, announced, to the gratification of the majority of the Delegations concerned, that their activities would be extended to new fields, that the terms of their assistance would be made more flexible, and that assistance would be provided quickly. On these different matters, we render homage to the authorities of the Fund and the Bank, whose initiatives thus anticipate our problems. In fact, it is to be noted that the development and improvement of the system of operation of international monetary and financial cooperation can really achieve the objectives sought only insofar as the efforts made in this connection are based on the continuing realities of the international community and the real needs of the member countries. . . .
In conclusion, I should like to join the other Delegations in expressing to the Japanese Government and people our hearty thanks for the warm welcome and for the kindnesses which have been heaped upon us.
Statement by the Governor of the Bank for the Sudan— Abdel Rahim Mirghani
. . . [On the] very important subject of the terms of financing, I would like to recall a recommendation of the Geneva Conference. I quote: “Loans for purchase of capital equipment or non-project assistance should not ordinarily be tied to purchases in donor countries and, keeping in view the desirability of flexibility to developing countries in their procurement policies, should be available for use in the best markets and particularly in the markets of recipient and other developing countries.” The Report of the International Monetary Fund clearly shows that “much of official loans and aid continues to be tied to purchases in the country providing them.” If anything, this trend is on the increase.
The Fund’s Report goes on to say that “in order that aid can be utilized as effectively as possible, this limitation [tied loans] should not be resorted to unless there are compelling justifications for it.” Heavy pressure on the balance of payments may often provide a justification to the donor country to tie its aid. The trouble is that such pressures will continue to make themselves felt in one way or another until the problem of international liquidity is solved. In the meantime, it seems to me possible to take development aid out of this balance of payments constraint. Many schemes and proposals have been advanced for the purpose of removing this constraint, but no serious consideration has so far been given to them. I sincerely hope that these proposals will be examined, for it is not beyond the ingenuity of mankind to devise a solution which will be internationally acceptable. Reverting to the problem of international liquidity, I certainly fully endorse the intention of the Executive Directors of the Fund to give this matter further study in the period ahead, the more so because the analysis in the Annual Report of the Fund indicates that further international action directed toward the expansion of liquidity may soon be required. . . .
Statement by the Governor of the Fund and Bank for Malaysia—Tan Siew Sin
. . . There is much in Mr. Schweitzer’s statement which I am happy to endorse. There is a depth of understanding of the basic problems facing developing countries such as my own in his remark that even where the immediate cause of a payments deficit is to be found in a country’s own policies, the difficulties may arise from deep-seated problems which hamper the achievement of an adequate rate of growth.
On the problem of international liquidity, I must congratulate the Fund for setting out the broad issues in its Annual Report so clearly, and for its statement of the findings and conclusions of its Executive Directors. It is a complex problem which calls for the most careful study. I note Mr. Schweitzer’s strong feeling that an increase in the quotas of Fund members at an early date is, at the present time, both justified and necessary. I should mention in this connection that my Government has accepted the necessity for increasing Malaysia’s quota in the Fund from $37.5 million to $100 million, and I understand that a Resolution to effect this will come up before the Board of Governors later this week. I should mention also that, to most developing countries, the requirement that 25 per cent of quota increases should be paid for in gold imposes a hardship on them, and I trust that this aspect of the problem of international liquidity will be given due consideration by the Fund. . . .
Statement by the Governor of the Bank for Dahomey—François Aplogan
It is not so much out of respect for an established custom but rather because I value at their true worth the achievements of the International Monetary Fund and of the International Bank for Reconstruction and Development and its affiliates that I express my pride in participating for the first time in these meetings.
I have another cause for pride and that is that this year the Governor for Dahomey is addressing you both as President of a monetary organization, composed of seven member countries of the IMF and the IBRD, and as the representative of his country.
We devoted some time, in the course of our statements at the meeting held in Washington in 1963, to describing the main features of the West African Monetary Union and its principal agency, the Central Bank of the West African States. Its main purpose continues to be the reinforcement of a system that provides greater stability for its member states through common reserves, the sharing of risks, and the support of a multinational agency.
Admittedly, our organization has been in existence for only two years, and it may appear too soon to come to any useful conclusions as to its structure and operation.
Nevertheless, we have had experience of its vitality and practical value, and we can even go so far as to say that it appears to represent one of the best ways of assisting countries of limited economic resources in dealing with their current economic problems.
The cooperation we receive from France appears to us to be an indispensable form of protection against the threat of exchange crises that might prejudice the economic development of our countries, the primary purpose of the Union being to meet the demands of an accelerated pace of capital formation.
But the technical links that bind us to the French currency do not in any way relieve us from our obligation to concern ourselves with the various problems of the international monetary system and in particular with the problem of international liquidities.
In fact, as our colleague from the Sudan stressed in his statement in 1962, cooperation between the industrialized countries with strong currencies and the developing countries is a necessity.
Furthermore, the World Conference on Trade and Development has recently drawn special attention to the important role that the International Monetary Fund can play in the compensatory financing of the fluctuations that arise in the export earnings of the developing countries.
We have followed very closely the studies undertaken, on the one hand, by the Group of Ten and, on the other, by the IMF. I should like to state that my country—and, I believe, all the developing countries—have found in the Fund an institution that is responsive to their problems and anxious to ensure that any modification of the organization of the international monetary system should take account of their interests.
This justifiable confidence is strengthened by the efforts of adaptation made by the Fund in the last two years in its desire to devote a larger share of its activities to Africa. The participation of an official from Dahomey in the first course given in French at the Fund’s new Institute enables me to assert confidently that these efforts are of high quality.
The measures taken by the Fund in the field of compensatory financing are undoubtedly valuable, although I believe it to be essential to go on to more far-reaching reforms.
Indeed, the studies published by the United Nations show that between 1876 and 1936 the average price of primary products fell by about one third in relation to that of manufactured goods, and that during the short period between 1950 and 1962 a fall of more than one quarter was recorded. Compensatory financing, as at present conceived, allows those countries that have already lost a not insignificant part of their earnings to incur indebtedness and to deceive themselves that they have bridged the gap. Long-term solutions are essential. . . .
Statement by the Governor of the Bank for China—Ching-Yu Chen
I wish to take this occasion to make some brief remarks on the Fund operations. We just had the pleasure of receiving in Taipei the visit of the Deputy Managing Director of the Fund, Mr. Southard. Such visits, in my opinion, will help in promoting mutual understanding and in strengthening cooperation between the Fund and its members.
We appreciate very much the efforts of the Fund Executive Directors and the Fund management in their studies on the problem of international liquidity. Although the existing general level of international liquidity is broadly satisfactory, there is a deficiency in the distribution of international reserves. If it is found that additional resources for the Fund are desirable, a special increase in the quotas of those members with strong currencies, abundant reserves, and surplus payments positions is just as important as a general increase in quotas. We are in favor of the adjustment of small quotas of the primary producing countries. The approach to facilitate assistance to all member countries, which will make members’ access to some portion of the credit tranches more assured, has our full support, and we hope for further progress along this line.
Although primary producing countries have recently benefited from rising prices for their products, the question of stabilizing the prices of primary products remains. The developing countries are in need of more credit facilities to stabilize their external payments position so that economic growth may not be impeded.
So far as the world trade situation of 1963 is concerned, we are gratified to note that the export earnings of several primary producing countries have greatly expanded. My country is among those fortunate members, and we have had a 51 per cent increase in export earnings in 1963 as compared with 1962. Our success in the promotion of exports is due as much to the absolute quantity increase and diversification of exports as to the improvement in world sugar prices. Our experience seems to show that, with self-help and friendly cooperation, it is within the grasp of developing and primary producing countries to strengthen their balance of payments positions. In this connection, we feel certain that the Fiscal Affairs Department and the Central Banking Service, newly established by the Fund, will be of great help in providing technical assistance to all developing countries. . . .
Statement by the Governor of the Bank for Iran—Amir Abbas Hoveyda
. . . Turning to the short-term financial facilities in a world where international liquidity is a major issue, the International Monetary Fund has proved active in extending facilities amounting to $625 million and also agreeing to stand-by arrangements of over $2,159 million.
I wish to record my appreciation for the studies conducted by the Fund and the Group of Ten in respect to international liquidity. My Government supports the idea of expanding international liquidity through increasing member countries’ quotas in the IMF. I am glad to learn that the Group of Ten will make additional studies with regard to the creation of new reserve assets as well as the interrelationship between internal liquidity and the balance of payments. However, I wish to see that these problems and proposals for their solution are examined from the viewpoint of the developing countries as well, and that liquidity requirements of the latter receive full attention. Although long-term capital is the developing nations’ main need, they have also to cope with short-term balance of payments difficulties, the main cause of which lies in the very execution of development plans. . . .
Statement by the Governor of the Bank for Pakistan—Mohammad Shoaib
. . . Before I conclude, may I say how deeply we are impressed by the activities of the IMF during the past year. I would particularly like to congratulate Mr. Schweitzer on the success of his efforts. The deliberations of this year’s meeting have once again focused attention on the problem of international liquidity, and we support the views expressed by the Managing Director that an increase in quotas is urgently needed, particularly, of course, to meet the requirements of some of the developed countries. Apart from a quota increase, there is an immense potential in the Fund for enlarging its crucial role in the international payments field in future years if its resources are sufficiently integrated with the working reserves of the member countries. At present, the supply of unconditional liquidity by the Fund is limited to drawings within the gold tranche. If the Fund’s drawing policy can be liberalized to provide for easier access to some portion of the credit tranches, a significant part of the Fund’s resources will become available for use in the same way as the members use their own reserves. . . .
Statement by the Governor of the Fund for Mali—Jean-Marie Kone
I have read with constantly sustained interest the Annual Reports of the International Monetary Fund and the International Bank for Reconstruction and Development and its affiliates. I was particularly impressed both by the realism of the authors and by the clarity and courage with which the Managing Director of the International Monetary Fund and the President of the World Bank stated and analyzed the problems now facing the world economy, whether in the field of international trade or liquidity or in the field of development financing.
In reading the Annual Report of the Fund, it appears clear that the relatively high rate of increase of international liquidity during the last decade is unlikely to be maintained in the years ahead unless special measures are taken on the world level to prevent the emergence of new obstacles to the development of international trade.
In like manner, in comparing the rates of growth per capita in the different countries, it appears that the developed countries as a whole are progressing more rapidly than the developing countries. If no drastic change occurs in this field to promote an accelerated growth of the countries of the Third World, the gap between the standards of living of these people and those of the industrialized countries is likely, in the future, to assume tragic dimensions for world peace itself.
At any rate, my own conviction is that this divergence in the rate of improvement of standards of living, which continues to widen dangerously, will unquestionably be the most important problem confronting mankind in the forthcoming decades.
Thus, in the light of these facts, which are taken as axiomatic by all modern economists, it appears increasingly evident that the fundamental economic problems cannot be solved henceforth within a strictly national context. They must be posed and their solution must be found on the world scale. For it is unfortunately a fact that national solutions are frequently incompatible with arrangements that can be accepted on the international level.
If, for example, the question of international liquidity is examined, it is unquestionably true that it was possible, in large part, to increase it in the past only insofar as certain countries showed constant balance of payments deficits. But the developed countries in question, particularly the United States, cannot afford to maintain a balance of payments eternally in deficit, and this by definition. Moreover, unilateral solutions taken at the national level are always likely to impede international trade or restrict movements of public or private capital.
It is also commonplace to point out that the problem of the indispensable economic take-off, so eagerly desired by the developing countries, will be satisfactorily solved only in an international context. With no intention of diminishing the role of internal forces in the different economies of the Third World, it can be said, however, that without more and more massive international aid the economic take-off of the developing countries will be extremely difficult, if not practically impossible. And if the underdeveloped countries had the misfortune to have to count only on themselves hereafter, this take-off would impose on their populations immense, almost unbearable, sacrifices which would entail serious consequences on the international level.
Thus the need for facing economic problems in an over-all world perspective should increasingly guide the actions and the very operation of the international financial institutions now assembled at the same distinguished meeting, and I wish at this point to congratulate the authorities of the International Monetary Fund and the World Bank for the efforts they have made in this direction.
It is particularly gratifying to us to learn that measures are envisaged for increasing the resources of the International Monetary Fund. But I must confess at the same time that it is with a pleasure somewhat tempered by uneasiness that most of the underdeveloped countries have received the idea of an immediate general adjustment of quotas which would oblige them to increase their contributions. For that reason, it would be advisable to make an amendment to this proposal which would have the purpose, if not of exempting the developing countries entirely from payment of their contributions, at least of giving them the opportunity to pay off their obligations gradually over a period to be determined, and particularly of exempting them from payment of the gold tranche. These are, on the whole, very small sacrifices which we ask of the rich nations in the name of just that international solidarity which is so highly extolled in speeches but which deserves to some extent, as in this situation, to be corroborated from time to time by the actual facts.
On the other hand, we warmly approve the International Monetary Fund’s decision to facilitate access to its resources, and I am particularly pleased to take this opportunity to tell the eminent Managing Director of the International Monetary Fund, Mr. Schweitzer, how much we have appreciated the always discreet but decisive part he has played in seeking a judicious solution to the grave difficulties which certain African countries have recently experienced, as has mine. . . .
Thus I come, in conclusion, to the future prospects opened up to our financial institutions, as outlined in the two Reports submitted to us. As to the problem of international liquidity, we approve the general idea expressed by the Managing Director of the Fund that it would be desirable to explore all the ways and means of remedying any shortages which might appear in the future. I shall add merely that this work must necessarily be done within an international institution, and that the committee to be given this task should be as representative as possible. That is why the developing countries attach great importance to this essential problem of the expansion of international liquidity.
If the solution of this problem is left to the free play of economic forces, it is to be feared that the costs of the operation would be largely supported by the developing countries, both in regard to the volume of international trade and capital flows and in the field of divergent movements of world prices, and this despite certain improvements—which, incidentally, are more apparent than real—noted in this regard during the past year. . . .
My Delegation, for its part, ardently hopes and desires that the financial institutions meeting here may in the very near future become, as a group, the sole and veritable conductor of international monetary and financial cooperation, the promoter and banker of economic development for the entire international community. It is by taking on this broadly international character on the most representative basis possible that the financial institutions assembled here at this distinguished meeting will be able to carry out fully and effectively the historic mission which they have now had for twenty years.
Allow me, then, to congratulate the management of the International Monetary Fund and the World Bank for the remarkable work accomplished during the past year. At the same time, in conclusion, may I address myself—which for me is a real pleasure —to my colleagues of the Japanese Delegation to ask them to convey to their Government and to the Japanese people my Delegation’s thanks for the warm welcome they have given us and to tell them of our great admiration for the work of national construction achieved in their country.
September 9 and 10, 1964.