Chapter

Interim Committee of the Board of Governors on the International Monetary System

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
October 1976
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Press Communiqué

October 2, 1976

1. The Interim Committee of the Board of Governors of the International Monetary Fund held its sixth meeting in Manila, Philippines, on October 2, 1976 under the chairmanship of Mr. Willy De Clercq, Minister of Finance of Belgium. Mr. H. Johannes Witteveen, Managing Director of the Fund, participated in the meeting. The following observers attended during the Committee’s discussions: G. D. Arsenis, Director, New York Office, UNCTAD; Henri Konan Bédié, Chairman, Development Committee; Wilhelm Haferkamp, Vice-President in Charge of Economic and Financial Affairs, CEC; René Larre, General Manager, BIS; E. van Lennep, Secretary General, OECD; F. Leutwiler, President, National Bank of Switzerland; Olivier Long, Director General, GATT; and Robert S. McNamara, President, IBRD.

2. The Committee discussed the world economic outlook and the functioning of the international adjustment process.

The Committee welcomed the economic recovery that has been under way for the last year; it expressed continued concern, however, about persistently high levels of unemployment and high rates of inflation in many countries. The Committee believes that in present circumstances the restoration of a reasonable degree of price stability will be necessary to establish the basis for sustained economic growth and the reduction of unemployment. Accordingly, the Committee is of the view that policies in the industrial countries at the present time should give priority to the reduction of price and cost inflation. This would require fiscal and monetary policies in these countries that would provide effective control over the expansion of aggregate demand in a manner compatible with this objective, even where price and incomes policies are in effect.

The Committee further agreed that, given the constraint under which demand management policies in the industrial countries must operate, special efforts, including the reduction in the barriers to trade in the negotiations now under way, to improve market access to the exports of developing countries and to increase the flow of development assistance would be indicated.

With respect to the international adjustment process, the Committee reached the following conclusions:

(a) As a result of the recovery in the world economy, exports are rising in many countries and the international environment has become much more favorable for the adjustment of external payments positions. The Committee believes that such adjustment, which should be symmetrical as between deficit and surplus countries, is now both urgent and opportune.

(b) To this end, deficit countries should arrange their domestic policies so as to restrain domestic demand and to permit the shift of resources to the external sector, to the extent necessary to bring the deficit on current account in line with a sustainable flow of capital imports and aid.

(c) Industrial countries in strong payments positions should ensure continued adequate expansion in domestic demand, within the limits set by effective anti-inflationary policies.

(d) Exchange rates should be allowed to play their proper role in the adjustment process.

(e) In the context of the use of the Fund’s resources, adjustment by deficit countries can be promoted by a larger use of the credit tranches and the extended Fund facility.

3. The Committee noted that, in accordance with the agreement incorporated in the provisions of the Proposed Second Amendment, the Fund will have the obligation to exercise firm surveillance over the exchange rate policies of members. The Executive Directors should consider how this function is to be exercised and should report to the Committee on this subject.

4. The Committee noted the section of the Annual Report of the Executive Directors dealing with developments in international liquidity. In accordance with its terms of reference the Committee requested the Executive Directors to keep all aspects of international liquidity under review and to report to it at a later meeting.

5. The Committee reviewed, on the basis of a report by the Executive Directors, the financial activities of the Fund, including developments in the Fund’s policies on the use of its resources and in the liquidity of the Fund. The Committee noted the unprecedented expansion in the use of the Fund’s resources by members in order to finance their balance of payments deficits and agreed that, even if all reasonable efforts toward adjustment were made, there might still be a need for a large use of the Fund’s resources in the near future. The Committee shared the view of the Executive Directors that greater emphasis should be placed on the adjustment by members of imbalances in their payments positions and that the use of the Fund’s resources should present the Fund with the opportunity to promote the use by members of the kind of adjustment measures that are most conducive to the interest of all. The Committee noted the actions taken by the Executive Directors with regard to the Trust Fund and welcomed their intention to keep the compensatory financing and buffer stock facilities under review.

6. The Committee endorsed the conclusions of the Executive Directors on the state of the Fund’s liquidity. The Committee urged that, pursuant to the Resolution on Quota Increases adopted by the Board of Governors last March, all members that have not yet done so should make the necessary arrangements for the use of their currencies in the operations and transactions of the Fund in accordance with its policies. It was agreed that the Fund’s liquidity should be kept under close review. The Committee stressed the fact that prompt adoption of the Proposed Second Amendment of the Articles and the subsequent completion of the steps necessary for quota increases under the Sixth General Review would provide the most effective way of improving the liquidity of the Fund.

7. The Committee noted that the Executive Directors will initiate in the near future the Seventh General Review of Quotas so that it can be concluded, as planned, in February 1978.

8. The Committee noted the report of the Executive Directors regarding the progress made by members in connection with their acceptance of the Proposed Second Amendment of the Fund’s Articles. In view of the importance that the entry into force of the amended Articles will have for the functioning of the international monetary system, the Committee urged all members that had not yet notified the Fund of their acceptance of the Second Amendment to complete as soon as possible the arrangements that would permit them to take this action.

9. The Committee agreed to hold its eighth meeting in Washington, D.C. on April 18 and 19, 1977.

Composition as of October 2, 1976

Willy De Clercq, Chairman
Hannes AndroschAustria
Hans Apel1Germany, Federal Republic of
Abdelkader BenslimaneMorocco
Mario Ramón Beteta2Mexico
Adolfo C. DizArgentina
W. F. DuisenbergNetherlands
Michel Durafour3France
Asumoh Ete Ekukinam4Nigeria
Fawzi El KaissiIraq
Denis W. Healey5United Kingdom
Per KleppeNorway
P. R. LynchAustralia
Donald S. MacdonaldCanada
Masayoshi Ohira6Japan
Sawet Piamphongsant7Thailand
Sambwa Pida NbaguiZaïre
William E. SimonUnited States
Mario Henrique SimonsenBrazil
Gaetano StammatiItaly
C. SubramaniamIndia

Announcement: October 6, 1976

The Interim Committee at its seventh meeting today in Manila selected Mr. Willy De Clercq, Minister of Finance of Belgium, to continue as its Chairman for a new term, following upon the election of Executive Directors of the International Monetary Fund which took place on October 5, 1976.

The Committee also decided that its eighth meeting previously announced for April 18 and 19, 1977 is now to be held on April 28 and 29, 1977 in Washington, D.C.

Composition: as of October 6, 1976

Mohammed Imady, Chairman ad interim Willy De Clercq, Chairman
Hans Apel8Germany, Federal Republic of
Abdelkader Benslimane9Morocco
Mario Ramón Beteta10Mexico
Willy De ClercqBelgium
Adolfo C DizArgentina
W. F. DuisenbergNetherlands
Michel Durafour11France
Asumoh Ete Ekukinam12Nigeria
Fawzi El KaissiIraq
Denis W. Healey13United Kingdom
P. R. LynchAustralia
Donald S. Macdonald14Canada
Masayoshi Ohira 15Japan
Tengku Razaleigh HamzahMalaysia
Sambwa Pida NbaguiZaïre
William E. Simon16United States
Mario Henrique SimonsenBrazil
Gaetano Stammati17Italy
C. SubramaniamIndia
Pierre VindeSweden

Alternate attending for the member:

Karl Otto Poehl

Ernesto Fernández Hurtado

Bernard Clappier

A. Ciroma

Sir Derek Mitchell

Teiichiro Morinaga

Snoh Unakul

Hans-Herbert Weber

Hassan Ali Mehran

Ernesto Fernández Hurtado

Bernard Clappier

A. Ciroma

Sir Derek Mitchell

Richie Ryan (Ireland)

Teiichiro Morinaga

Edwin H. Yeo III

Silvano Palumbo

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