Reports of the Joint Procedures Committee
- International Monetary Fund. Secretary's Department
- Published Date:
- November 1980
|Reporting Member||United Kingdom|
Other Members: Australia, Burma, Cameroon, Ecuador, France, Federal Republic of Germany, Italy, Japan, Kuwait, Lesotho, Netherlands, Oman, Saudi Arabia, Singapore, Spain, Thailand, United States, Venezuela
Report I 1
October 2, 1980
At the meeting of the Joint Procedures Committee held on October 2, 1980, the items of business on the agenda of the Board of Governors of the International Monetary Fund were considered.
The Committee submits the following report and recommendations:
1. 1980 Annual Report
The Committee noted that provision had been made for the annual discussion of the business of the Fund.
2. Report of the Chairman of the Interim Committee
The Committee noted the presentation made by the Temporary Chairman of the Interim Committee.2
The Committee recommends that the Board of Governors of the Fund thank the Interim Committee for its work.
3. 1980 Regular Election of Executive Directors
The Committee noted that the 1980 Regular Election of Executive Directors of the Fund [Annex I] had taken place and that the next Regular Election of Executive Directors will take place at the Annual Meeting of the Board of Governors in 1982.
4. Financial Statements, Report on Audit, and Administrative Budget
The Committee considered the Report on Audit for the financial year ended April 30, 1980, the Financial Statements contained therein (Fund Document No. 7 and Appendix VIII of the 1980 Annual Report), and the Administrative Budget for the financial year ending April 30, 1981 (Fund Document No. 9 and Appendix VI of the 1980 Annual Report).
The Committee recommends that the Board of Governors of the Fund adopt the draft resolution set forth in Fund Document No. 8.3
5. Amendments of Rules and Regulations
The Committee has reviewed and noted the letter of the Managing Director and Chairman of the Executive Board to the Chairman of the Board of Governors, dated September 30, 1980, reproduced as Fund Document No. 10, regarding amendments of the Rules and Regulations set forth in Attachment 1 to that document [Annex II].
The Committee recommends that the Board of Governors of the Fund adopt the draft resolution set forth in Attachment 2 of Fund Document No. 10.4
|/s/ Amir H. Jamal||/s/ J. Anson|
|Tanzania—Chairman||United Kingdom—Reporting Member|
Annex I to Report I
Regulations for the Conduct of the 1980 Regular Election of Executive Directors of the Fund
1. Definitions: In these Regulations, unless the context shall otherwise require:
(a) “Articles” means the Articles of Agreement of the Fund.
(b) “Board” means the Board of Governors of the Fund.
(c) “Chairman” means the Chairman or a Vice Chairman acting as Chairman of the Board.
(d) “Governor” includes the Alternate Governor or any temporary Alternate Governor when acting for the Governor.
(e) “Secretary” means the Secretary or any acting Secretary of the Fund.
(f) “Election” means the 1980 Regular Election of Executive Directors.
(g) “Eligible votes” means the total number of votes that can be cast in the election.
2. Date of Election: The election shall be held during a plenary session of the 1980 Annual Meeting to be held Wednesday, October 1, 1980.
3. Eligibility: The Governors eligible to vote in the election shall be all of the Governors except those of the members that:
(a) are entitled to appoint an Executive Director pursuant to Article XII, Section 3(b) (i) ;
(b) have notified the Managing Director, in accordance with the procedure established by the Executive Board, of their intention to appoint an Executive Director pursuant to Article XII, Section 3 (c).
4. Schedule E: Subject to the supplemental regulations set forth herein, the provisions of Schedule E of the Articles shall apply to the conduct of the election.
5. Number of Executive Directors to Be Elected:
(a) Sixteen Executive Directors shall be elected, provided however, that only fifteen Executive Directors shall be elected (i) if the eligible votes for the first ballot have not been increased to more than two hundred fifty thousand votes, or (ii) if fewer than sixteen nominees receive at least four and two-tenths per cent each of the eligible votes on the first ballot.
(b) If sixteen Executive Directors are to be elected, “sixteen persons” shall be substituted for “fifteen persons” in paragraph 2 of Schedule E.
6. Proportion of Votes Required to Elect:
In paragraphs 2 and 5 of Schedule E “four per cent” shall be changed to “four and two-tenths per cent”. In paragraphs 3, 4, and 5 “nine per cent” shall not be changed.
(a) Any person nominated by one or more Governors eligible to vote in the election shall be eligible for election as an Executive Director.
(b) Each nomination shall be made on a Nomination Form furnished by the Secretary, signed by the Governor or Governors making the nomination, and deposited with the Secretary.
(c) A Governor may nominate only one person.
(d) Nominations may be made until 12 o’clock noon on the day before the day on which the election is scheduled to be held. The Secretary shall post and distribute a list of the persons nominated.
8. Supervision of the Election: The Chairman shall appoint such tellers and other assistants and take such other action as he deems necessary for the conduct of the election.
9. Ballots and Balloting:
(a) One ballot form shall be furnished, before a ballot is taken, to each Governor eligible to vote. On any particular ballot only ballot forms distributed for that ballot shall be counted.
(b) Each ballot shall be by a call of members whose Governors are eligible to vote and each ballot signed by the Governor, shall be deposited in the ballot box.
(c) When a ballot has been completed, the Chairman shall cause the ballots to be counted and shall announce the names of the persons elected promptly after the tellers have completed their tally of the ballots. If a succeeding ballot is necessary, the Chairman shall announce the names of the nominees to be voted on and the members whose Governors are eligible to vote.
(d) If the tellers are of the opinion that any particular ballot form is not properly executed, they shall, if possible, afford the Governor concerned an opportunity to correct it before tallying the results, and the ballot form, if corrected, shall be deemed valid.
(e) If a Governor does not vote on any ballot, he shall not be entitled to vote on any subsequent ballot and his votes shall not be counted, under Article XII, Section 3(i) (iii), towards the election of any Executive Director.
(f) If, at the time of any ballot, a member does not have a duly appointed Governor, such member or its Governor shall be taken not to have voted on that ballot.
10. If on any ballot there are more nominees than the number of Executive Directors to be elected and two or more nominees tie with the lowest number of votes, no nominee shall be ineligible for election in the next succeeding ballot, but if the same situation is repeated on such succeeding ballot, the Chairman shall eliminate by lot one of the nominees from the following ballot.
11. If on any ballot two or more Governors having an equal number of votes have voted for the same nominee and the votes of one or more, but not all, of these Governors could be deemed under paragraph 4 of Schedule E to have raised the total votes received by the nominee above nine per cent of the eligible votes, the Chairman shall determine by lot the Governor or Governors, as the case may be, who shall be entitled to vote on the next ballot.
12. When on any ballot after the first ballot, the number of nominees is the same as the number of Executive Directors to be elected, and no nominee is deemed to have received more than nine per cent of the eligible votes, each nominee shall be considered elected by the number of votes received even though a nominee may have received less than four and two-tenths per cent of the eligible votes.
13. If the votes cast by a Governor raise the total votes received by a nominee from below to above nine per cent of the eligible votes, the votes cast by the Governor shall be deemed under paragraph 4 of Schedule E not to have raised the total votes of the nominee above nine per cent.
14. Any member whose Governor has voted on the last ballot for a nominee not elected may, before the effective date of the election, designate an Executive Director who was elected, and that member’s votes shall be deemed to have counted towards his election.
15. Announcement and Review of Result:
(a) After the tally of the last ballot, the Chairman shall cause to be distributed a statement setting forth the result of the election.
(b) The Board of Governors, at the request of any Governor, will review the result of the election in order to determine whether, in light of the objectives set forth in Chapter O, Section 2 of the Report by the Executive Directors to the Board of Governors on the Proposed Second Amendment to the Articles of Agreement an additional Executive Director should be elected to serve for the term of office commencing November 1, 1980.
16. Effective Date of Election of Executive Directors: The effective date of election shall be November 1, 1980, and the term of office of the elected Executive Directors, and of any Executive Director appointed under Article XII, Section 3 (c), shall commence on that date. Incumbent elected Executive Directors shall serve through October 3Í, 1980.
17. General: Any questions arising in connection with the conduct of the election shall be resolved by the tellers, subject to appeal, at the request of any Governor, to the Chairman and from him to the Board. Whenever possible, any such question shall be put without identifying the members or Governors concerned.
As approved by Board of Governors Resolution No. 35-8, September 8,1980
Statement of Results of Elections, October 1, 1980
|Members Whose Votes|
|Candidate Elected||Counted Toward Election5||Number of Votes|
|Ariel Buira||Costa Rica||660|
|Jacques de Groote||Austria||3,550|
|Bernard J. Drabble||Bahamas||580|
|Syrian Arab Republic||880|
|United Arab Emirates||1,450|
|Yemen Arab Republic||380|
|Yemen, People’s Dem. Rep. of|
|Juan Carlos Iarezza||Argentina||5,600|
|Trinidad and Tobago|
|Lao People’s Dem. Rep.||410|
|Central African Republic||410|
|São Tomé and Principe||270|
|H. O. Ruding||Cyprus||590|
|Robert J. Whitelaw||Australia||8,150|
|Papua New Guinea||550|
|/s/ D. N. Ndegwa||/s/ D. H. Boot|
Annex II to Report I
September 30, 1980
Dear Mr. Chairman:
In accordance with Section 16 of the By-Laws, the attached amendments of the Rules and Regulations adopted since the 1979 regular meeting are submitted for review by the Board of Governors.
Executive Directors decided, on September 17, 1980, to introduce one basket consisting of the five main currencies, namely, the U.S. dollar, the deutsche mark, the French franc, the Japanese yen, and the pound sterling, for the determination of the valuation and the interest rate on the special drawing right (SDR). This decision gave practical effect to a recommendation by the Interim Committee at its meeting in Hamburg in April 1980 which endorsed the objectives of simplifying and enhancing further the attractiveness of the SDR, and generally expressed the view that it would be desirable for the interest rate and valuation baskets to be identical.
The Executive Board’s decisions included the adoption of amendments to Rules O-1 and T-1 and a consequential change in Rule I-10(b), all of which will become effective January 1, 1981. The percentage weights for the currencies in the basket for the valuation of the SDR were established to reflect broadly the relative importance of these currencies in the international trading and financial system as defined in the decision on the method of valuation of the SDR which was adopted in March 1978. The SDR interest rate will be based on the combined market interest rate which will be calculated on the basis of the yield or rate of interest on instruments selected for each of the five currencies and the respective amount of the currency in the valuation basket. The SDR interest rate will continue to be set at 80 per cent of the calculated combined market interest rate.
It has also been decided that it is no longer necessary to review the rate of interest on holdings of special drawing rights each quarter. A review of all matters other than the list of currencies and their amounts will be conducted annually around the end of the Fund’s financial year. The rate of remuneration, which was reviewed on the occasion of the quarterly reviews of the rate of interest on the SDRs, is now to be reviewed annually as well. A consequential amendment to Rule I-10(b) has also been adopted, with effect from January 1, 1981, to state that the Fund shall review the rate of remuneration on the occasion of the annual, rather than the quarterly, review of the rate of interest paid by it on holdings of special drawing rights.
The Executive Board has made no other changes in the Rules and Regulations since the last Annual Meeting.
Very truly yours,
J. de Larosière
Managing Director and
Chairman of the Executive Board
Chairman of the Board of Governors 1980 Annual Meeting International Monetary Fund
Attachment 1. Rules and Regulations Amended Since the 1979 Annual Meeting
1. Rule O-1. Text as amended September 17, 1980, effective January 1, 1981.
O-1. The value of the special drawing right shall be the sum of the values of the following amounts of the following currencies:
2. Rule T-1. Text as amended September 17, 1980, effective January 1, 1981.
(a) Interest and charges in respect of special drawing rights shall accrue daily at the rate referred to in (b) below and shall be paid promptly as of the end of each financial year of the Fund. The accounts of participants shall be credited with the excess of interest due over charges or debited with the excess of charges over the interest due. The accounts of holders that are not participants shall be credited with the interest due.
(b) The rate of interest on holdings of special drawing rights for each calendar quarter shall be four-fifths of the combined market interest rate as determined in (c) below, provided that the rate shall be rounded to the nearest ⅛ of 1 per cent.
(c) The combined market interest rate shall be the sum of the average yield or rate on each of the respective instruments listed below for the fifteen business days preceding the last two business days of the last month before the calendar quarter for which interest is to be calculated, with each yield or rate multiplied by the number of units of the corresponding currency listed in Rule O-l and the value in terms of the special drawing right of a unit of that currency as determined by the Fund under Rule O-2(a) and (b). The yields and rates for this calculation are:
Market yields for three-month U.S. Treasury bills
Three-month interbank deposits rate in Germany
Three-month interbank money rate against private paper in France
Discount rate on (private) bills in Japan passing two month-ends
Market yields for three-month U.K. Treasury bills
(d) The Fund will review the rate of interest on holdings of special drawing rights at the conclusion of each financial year.
3. Rule I-10(b). Text as amended September 17, 1980, effective January 1, 1981.
(b) The Fund shall review the rate of remuneration on the occasion of the annual review of the rate of interest paid by it on holdings of special drawing rights.
Annex to Attachment 1 Special Drawing Right—Method of Valuation
1. Effective January 1, 1981, the value of one special drawing right shall be the sum of the values of specified amounts of the currencies listed in paragraph 2 below, the amounts of these currencies to be determined on December 31, 1980 in a manner that will ensure that, at the average exchange rates for the three-month period ending on that date, the shares of the currencies in the value of the special drawing right correspond to the weights specified for each currency in paragraph 2 below.
2. On the basis of changes in members’ exports of goods and services and in official balances of members’ currencies held by other members since the previous review of the method of valuation of the SDR conducted in March 1978, that the currencies and weights referred to in paragraph 1 above shall be as follows:
|Currency||(In per cent)|
3. The list of the currencies that determine the value of the special drawing right, and the amounts of these currencies, shall be revised with effect on January 1, 1986 and on the first day of each subsequent period of five years in accordance with the following principles, unless the Fund decides otherwise in connection with a revision:
a. The currencies determining the value of the special drawing right shall be the currencies of the five members whose exports of goods and services during the five-year period ending 12 months before the effective date of the revision had the largest value, provided that a currency shall not replace another currency included in the list at the time of the determination unless the value of the exports of goods and services of the issuer of the former currency during the relevant period exceeds that of the issuer of the latter currency by at least 1 per cent.
b. The amounts of the five currencies referred to in paragraph 3 a above shall be determined on the last working day preceding the effective date of the relevant revision in a manner that will ensure that, at the average exchange rates for the three-month period ending on that date, the shares of these currencies in the value of the special drawing right correspond to percentage weights for these currencies, which shall be established for each currency in accordance with paragraph 3c below.
c. The percentage weights shall reflect the value of the balances of that currency held at the end of each year by the monetary authorities of other members and the value of the exports of goods and services of the issuer of the currency over the relevant five-year period referred to in paragraph 3 a above, in a manner that would maintain broadly the relative significance of the factors that underlie the percentage weights in paragraph 2 above. The percentage weights shall be rounded to the nearest 1 per cent or as may be convenient.
4. The determination of the amounts of the currencies in accordance with paragraph 1 and paragraph 3 above shall be made in a manner that will ensure that the value of the special drawing right in terms of currencies on the last working day preceding the five-year period for which the determination is made will be the same under the valuation in effect before and after revision.
October 2, 1980
The Joint Procedures Committee met on October 2, 1980 and submits the following report:
1. Development Committee
The Committee noted that the Annual Report of the Joint Ministerial Committee of the Boards of Governors of the Fund and the Bank on the Transfer of Real Resources to Developing Countries (Development Committee) has been presented to the Boards of Governors of the Fund and the Bank pursuant to paragraph 5 of Resolutions Nos. 29-9 and 294 of the Fund and the Bank, respectively (Fund Document No. 5 and Bank Document No. 3) [Annex].
The Committee recommends that the Boards of Governors of the Fund and the Bank note the report and thank the Development Committee for its work.
2. Officers and Joint Procedures Committee for 1980/81
The Committee recommends that the Governors for Uruguay be Chairmen, and the Governors for Botswana and Finland be Vice Chairmen, of the Boards of Governors of the Fund and of the Bank and its Affiliates, to hold office until the close of the next Annual Meetings.
It is further recommended that a Joint Procedures Committee be established to be available, after the termination of these Meetings and until the close of the next Annual Meetings, for consultation at the discretion of the Chairmen normally by correspondence and, if the occasion required, by convening; and that this Committee shall consist of the Governors for the following members, Algeria, Austria, Bahrain, Botswana, China, Ethiopia, Finland, France, Federal Republic of Germany, Honduras, Indonesia, Jamaica, Japan, Madagascar, Mexico, Nepal, Portugal, Saudi Arabia, Trinidad and Tobago, United Kingdom. United States, and Uruguay.
It is recommended that the Chairmen of the Joint Procedures Committee shall be the Governors for Uruguay, and the Vice Chairmen shall be the Governors for Botswana and Finland, and that the Governors for Indonesia shall serve as Reporting Member.
|/s/ Amir H. Jamal||/s/J. Anson|
|Tanzania—Chairman||United Kingdom—Reporting Member|
Annex to Report III
September 29, 1980
As Chairman of the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee), I have the honor to present herewith to the Boards of Governors a report by the Committee on the progress of its work during the period July 1979-June 1980. The report is presented in compliance with Section 5(i) of the Bank Board of Governors Resolution No. 294 and the Fund Board of Governors Resolution No. 29-9, adopted on October 2, 1974.
Cesar E. A. Virata
Chairman Development Committee
The Honorable Amir H. Jamal
Chairman of the Boards of Governors International Monetary Fund and the World Bank
Attachment Report of the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries
(July 1979-June 1980)
1. This is the sixth annual report of the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee). It covers activities from July 1979 to June 1980.
2. The Development Committee was established to provide a focal point in the structure of economic cooperation for formation of a comprehensive overview of the development process and to consider all aspects of the broad question of the transfer of real resources to developing countries. During the year under review the Committee sought to promote international consensus at a high political level on a number of vital issues of mutual interest to the developed and the developing countries. The discussions were designed to facilitate decisions on development issues in other appropriate bodies.
3. The Committee held two meetings during the year—the first in Belgrade on September 30, 1979 at the time of the Annual Meetings of the Boards of Governors of the Bank and the Fund, and the other in Hamburg on April 24, 1980. At the technical and preparatory level the two Task Forces set up by the Committee for the study of the role and scope of private foreign investment and of nonconcessional capital flows held a series of meetings during the year. The Task Force on Private Foreign Investment is expected to present its final report and recommendations to the next meeting of the Development Committee. The Task Force on Nonconcessional Flows will present a progress report at that time and will submit its final report in 1981.
4. This was the first full year of the Committee’s operations under the reorganization of its work and the restructuring of the Secretariat functions which were put into effect from April 1, 1979. The objective was to enhance the effectiveness of the Committee through a greater involvement of the staffs and the Boards of the two institutions. The changes introduced made the organization of the Committee’s work the joint responsibility of the Chairman of the Development Committee, the President of the Bank and the Managing Director of the Fund, assisted by the Executive Secretary. This change, which will be more fully evaluated at the time of the review of the Committee now due to take place in 1981, has already resulted in greater involvement of the management and the Boards of the two institutions.
5. The main thrust of the Committee’s work in the period under review has been on concessional and nonconcessional capital flows to developing countries, the role and scope of private foreign investment and the contribution that the Fund and the Bank could make to meet the medium-long term needs of developing countries for structural adjustment. The study of these subjects was facilitated by a detailed analysis of the world economic situation, trends and projections contained in the World Development Report and the World Economic Outlook documents prepared by the Bank staff and the Fund staff, respectively. The Committee also gave preliminary consideration to the recommendations arising from the Group of Twenty-Four Program of Immediate Action and the Report of the Brandt Commission, and will be continuing its work in relation to these reports in the coming year.
II. Committee Consideration of Major Questions Affecting Resource Transfers
A. World Development Report and Economic Situation and Prospects Facing the Developing Countries
6. The World Development Report, 1979, was the second in the series and, with its global survey of the economic situation and future trends, statistical data and analytical work, served as a valuable background to the Committee’s discussions on many current development issues. While the 1978 report gave particular attention to the problems and prospects of the poor countries of Asia and sub-Saharan Africa, the 1979 Report paid special attention to the development issues faced by the middle-income countries, particularly in the areas of industrialization and urbanization and the importance of achieving balance and complementarity between industry and agriculture.
7. So far as capital needs are concerned, the net disbursements of medium- and long-term capital to developing countries needed to support the relatively modest growth rates postulated in the Report were estimated at $122 billion in 1985 and $183 billion in 1990, as compared with $46 billion in 1976. These are formidable figures and massive efforts will be needed both on the part of the international community and of the developing countries.
8. The analysis in the Report and the alternative set of projections for future developments up to 1990 highlight the crucial role of development strategies and policies in creating productive employment and alleviating poverty in the developing world—a task which can be accomplished only in an improved international environment of liberal trade regimes and increased capital flows.
9. The Committee discussed the deteriorating global economic situation. The background papers prepared by the Bank and the Fund depicted a severe and worldwide problem of high inflation, rising unemployment, and slower rates of growth. The unfavorable impact on import costs of the second major increase in oil prices and of higher rates of inflation in the industrialized countries, and the slower growth of the export earnings of developing countries in the face of sluggish growth rates in the industrial countries had a particularly severe effect on most developing countries. In this connection, the Development Committee has called for the avoidance and reduction of any protectionist trade measures which adversely affect the exports of developing countries. The oil importing developing countries were expected to face massive current account deficits rising from $36 billion in 1978 to an estimated $68 billion in 1980, and as much as $80 billion in 1981. The position of the low-income developing countries is more vulnerable and serious as they have limited scope for adjustment in their economies and have to place greater reliance on official development assistance. ODA, as a whole, has shown little real growth; the Committee agreed that present flows of concessional assistance were inadequate to meet the needs of the poorer developing countries and that unless urgent action were taken their condition would further deteriorate. The middle-income developing countries, which had been meeting and will continue to meet a large portion of their financial requirements through borrowings from the private sector, also face a difficult situation in the period ahead. In present circumstances, most countries will have to adjust and avoid over-expansionary policies. Developments in international financial markets particularly in early 1980 made it more difficult and expensive for developing countries to secure appropriate long-term financing for their development programs. The cumulative increase in debt as a result of prolonged deficits makes the adjustment process all the more necessary.
10. The Committee viewed this global economic deterioration with concern and recognized the need for prompt corrective action to avoid a sharp deterioration in the social and economic environment in many of the developing countries. The major studies undertaken and considered in this context are briefly described in the part of the report which follows.
B. Financial Flows to Developing Countries and the Adjustment Process
11. The Committee, in the context of the marked deterioration of the external position of the developing countries, recognized that there was clear need for broad multilateral efforts to meet the situation. It considered, under several items, and, on the basis of different studies, a whole range of specific issues and methods for increasing the volume and quality of financial flows, including the extension of cofinancing programs and close collaboration between the Fund and the Bank to deal with medium- and long-term structural problems.
(i) Improvements in Fund facilities
12. The Committee noted with satisfaction a number of developments that had recently enhanced the Fund’s capacity to assist its members, e.g., agreement on the Seventh General Review of Quotas, the coming into force of the supplementary financing facility, the adoption of new guidelines on conditionality and improvements in the compensatory financing facility, making it a more effective mechanism to assist members in dealing with problems of fluctuations of export earnings. At their meeting in September 1979 the Committee requested the Executive Board of the Fund to give further consideration to increasing the maximum repurchase period of the extended Fund facility from eight to ten years and at their meeting in April 1980 they noted the Board’s decision to adopt this course, as well as to reduce the number and frequency of repurchase installments. The combined effect of these measures will be to increase the average life of drawings outstanding under this facility by almost one fifth. This action will spread the adjustment effort over a longer period and lessen the financial burden of using the extended Fund facility.
13. The Committee also considered the need to lower the cost of the Fund’s new supplementary financing facility to encourage its greater use by member countries which require balance of payments financing in larger amounts and for longer periods than normally covered by the Fund’s regular credit tranches. This improvement would be of special advantage to developing countries and the Committee expressed the hope that the Fund would develop appropriate mechanisms to this end.
(ii) Funding of the World Bank and regional banks
14. The Committee welcomed the agreements on doubling the capital of the World Bank and on substantial increases in the capital of the African Development Bank and the Inter-American Development Bank. It also welcomed the conclusion of negotiations for the Sixth Replenishment of IDA at $12 billion for the period 1980-82, representing a significant increase in real terms, as well as similar replenishments of the concessional resources of the Inter-American Development Bank, the International Fund for Agricultural Development and The OPEC Fund for International Development (formerly The OPEC Special Fund). At the same time, however, they expressed concern at the delay in giving legislative effect to these agreements and urged member governments to take all necessary steps to ensure continuity in the operations of these institutions.
(iii) ODA flows
15. While recognizing the difficulties facing some donor countries, the Committee reaffirmed the strong and urgent need for increasing the volume of official development assistance directed toward achieving the target of 0.7 per cent of GNP, particularly by those countries which are now at relatively low levels in relation to their GNP. Many Members stressed that the low performers should commit themselves to specific and substantial annual growth rates in their ODA programs in real terms. The Committee also stressed the need for ODA to be concentrated more particularly on low-income countries. Moreover, while there has been a significant improvement in the terms of ODA flows, more can be done to improve the quality of such flows through untying of aid, providing more quick disbursing type assistance and financing local costs. In view of the critical importance of concessional flows for the low-income countries, the Committee has asked for a further study on the issue of ODA flows, both present and prospective, and on ways and means to improve the present unsatisfactory situation.
(iv) Program lending for structural adjustment
16. The Committee welcomed the Bank’s proposal to increase its program lending and in particular to make structural adjustment loans on appropriate terms and conditions to countries which face a severe balance of payments deficit over a prolonged period. This type of assistance should help the affected countries to carry out structural adjustments in their economies that were necessary to avoid further balance of payments crises and to pursue an orderly and sustained program of development. The adjustment process would comprehend a widespread effort including a more effective use of capital, increased domestic savings, expansion in domestic production of energy and its conservation, larger output of food and efficient import substitution, and export expansion and diversification. This challenging task will obviously require both additional resources and time, and the type of structural adjustment lending envisaged is designed to help the countries meet this challenge. Regional institutions were also invited to review their present policies and practices in the light of the current prospects for developing countries.
17. The Committee noted the rapid increase which had taken place in cofinancing programs of the World Bank with official aid agencies, export credit institutions, and private lenders. The volume cofinancing operations is expected to reach almost $5 billion in FY80, which includes about $1.5 billion of cofinancing with commercial banks. This rapid increase was, however, still small in relation to the need. The Committee therefore suggested that capital exporting countries should explore what further action could be taken to encourage greater use of this mechanism by their private banks. It also requested the World Bank and regional institutions to explore steps to further expand their co-financing programs.
(vi) Task Force on Nonconcessional Flows
18. The efforts of the two Bretton Woods institutions and the regional banks, though important both in themselves and as catalysts for stimulating additional flows from bilateral agencies and others, would clearly need to be supplemented by other sources of finance. There is a rising need for nonconcessional funds to assist developing countries facing extraordinarily large and persistent balance of payments deficits which could not possibly be met by official financial flows. The Committee therefore decided to set up a Task Force to examine problems related to nonconcessional flows as a matter of urgency and to report to the Committee with specific recommendations for action that will help in the solution of this problem.
C. Stabilization of Export Earnings
19. This is a subject of great importance to many developing countries and particularly those which are heavily dependent upon primary commodity exports. In 1978 the Committee had requested the Bank and the Fund to prepare a detailed study on this subject for its consideration.
20. This study was submitted to the Committee at its September 1979 meeting. The Committee recognized that through coordinated action the Bank and the Fund had developed the capacity to meet the needs of countries suffering from shortfalls and noted in particular the progress that the two institutions had made in providing finance for medium-term commodity shortfalls and in reducing dependence on primary commodities. It requested the Executive Boards of the two institutions to keep this matter under review.
21. The Committee welcomed the recent decision of the Executive Board of the Fund to liberalize the Fund’s compensatory financing facility by raising the limit on the amount of drawings outstanding under the facility, eliminating the annual limit on drawings and extending the coverage of the facility to include tourism and workers’ remittances. The changes constitute a substantial improvement in the Fund’s compensatory financing facility, making it a more effective mechanism to assist members in dealing with problems of fluctuations of export earnings. The Committee noted that in the longer run vulnerability to fluctuating export earnings would be reduced by diversifying exports. The Bank and IDA resources should continue to be made available to improve export potential through diversification. The Committee also welcomed the new convention replacing the Lomé Convention and the new features of the STABEX incorporated in the new convention. They also noted with satisfaction the progress made in negotiations for the setting up of a Common Fund for commodities.
22. It was agreed that the subject of export earnings stabilization would be reviewed by the Committee in a year’s time in the light of experience in operation of the recently improved compensatory financing facility, the ongoing negotiations on the Common Fund, and the further study of the matter being undertaken in UNCTAD in cooperation with Fund staff.
D. Group of Twenty-Four Program of Immediate Action
23. At the Belgrade meeting of the Development Committee, the Group of Twenty-Four, with the unanimous support of the Group of 77, presented a detailed paper containing comprehensive proposals to achieve international monetary and financial reforms. The paper sketched out some 13 measures in the areas of money, trade, and transfer of real resources to developing countries. Many of these proposals have also been supported in the report of the Brandt Commission.
24. The Committee took note of the document circulated at the meeting and agreed to keep its proposals in view in its search for specific measures within the framework of a broad multilateral effort which the world economic situation demanded.
25. The Committee at its Hamburg meeting reviewed the current state of discussions relating to the Group of Twenty-Four Program of Immediate Action. While recognizing that international agreement had been reached on some of the proposals and that some others were under discussion, they stressed the importance of reaching early agreement on other items of a developmental character, particularly an increase in the volume of ODA, completion of the process of the Sixth Replenishment of IDA, and a significant increase in the amount of program lending. A number of the proposals in the Group of Twenty-Four paper relate to monetary issues; at its meeting in Hamburg, the Interim Committee requested the Fund to begin an in-depth examination of these issues with a view to substantive discussion at its September meeting. The Fund has begun this task and the Fund Board is discussing staff reports relating to a number of issues. A progress report is to be submitted to the Interim Committee on these matters. It will also be made available to the Members of the Development Committee.
E. Brandt Commission Report—Preliminary Discussion
26. The Brandt Commission, which was set up in 1978 at the initiative of Mr. Robert S. McNamara, President of the World Bank, published its Report in February 1980. The mandate of the Commission was “to study the grave global issues arising from the economic and social disparities of the world community and to suggest ways of promoting adequate solutions to the problems involved in development and in attacking absolute poverty”. Further, the Commission was “to identify desirable and realistic directions for international development policies in the next decade….”
27. The Commission’s Report offers both a comprehensive analysis of the economic and development problems facing the world and directions in which solutions need to be found in the interests of both the developed North and the developing South. The Report suggests that the growing and strong mutuality of interests between the North and the South and the increasing global interdependence are not yet fully understood and appreciated. The Report therefore emphasizes that the self-interest of all the nations in a common approach must be recognized and must provide the framework for international action. It presents an emergency program for early adoption while work and preparation on its more far-reaching proposals are set in motion. The Committee, at its Hamburg meeting, welcomed the publication of the Brandt Commission Report and viewed its recommendations as a useful basis for consideration by the international community. The Committee noted that a considerable number of the proposals related to the Bank, the Fund, and the regional banks and that these institutions are currently examining these recommendations. They requested that specific papers should be prepared on those recommendations of the Commission’s Report that were of particular relevance to the Committee’s work. The work is currently in hand and reports by the Bank and the Fund will be considered by the Committee at its September 1980 meeting.
F. Other Matters
(i) Working Group Report on Multilateral Development Institutions
28. Among other matters considered by the Committee during the year was the Working Group Report on Multilateral Development Institutions. This report provided extensive statistical and analytical material on these institutions and highlighted the important role which they play as channels for the transfer of resources to developing countries. A desire was expressed that periodic updating of a study of this nature and its presentation to the Committee would serve a useful purpose.
(ii) Special Action Program
29. The Secretariat’s brief progress report on the Special Action Program indicated that the whole of the $1 billion pledged by the donor government participants at the CIEC meeting in 1977 had now been committed to a variety of purposes and that the disbursements would be completed in the early 1980s.
(iii) Restrictions on access to capital markets
30. The Committee welcomed the second annual Fund staff report on recent developments in developing country access to capital markets. The preparation of such a report, based on the Fund’s regular consultations with member countries, was considered to be of particular importance in the light of the need for developing countries to secure non-concessional funds at longer maturities and to tap sources which they had not so far been able fully to exploit.
III. Future Tasks
31. The period ahead, when the world will continue to face acute and persistent economic difficulties, will be one of intense debate and search for solutions. Impending negotiations, particularly in the UN General Assembly, and the debate around the 73 recommendations in the Report of the Brandt Commission and the Program of Immediate Action on International Monetary Reform prepared by the Group of Twenty-Four will command the attention of all those concerned with development issues. In this context, the Development Committee, with its broad representation, its compact size and the expertise of its Members, would seem to be an appropriate forum in which to promote international consensus particularly on issues relevant to the World Bank and in some cases the IMF and to facilitate decisions in appropriate bodies.
A. Members of the Committee
B. Organizational and Administrative Aspects
C. Text of Parallel IBRD and IMF Resolutions Establishing the Development Committee (see Summary Proceedings, 1975, pages 278-82.)
D. Agendas and Press Communiqués of Meetings held in September 1979 and April 1980
Annex A: Members of the Committee
Abdlatif Y. Al-Hamad
Kuwait Fund for Arab Economic Development
|Bahrain, Egypt (Arab Rep. of), Iraq, Jordan, Kuwait, Lebanon, Maldives, Pakistan, Qatar, Saudi Arabia, Syrian Arab Republic, United Arab Emirates, Yemen Arab Republic|
Minister of Economy and Finance
|Argentina, Bolivia, Chile, Paraguay, Uruguay|
Minister of Finance
|Costa Rica, El Salvador, Guatemala, Haiti, Honduras, Mexico, Panama, Peru, Spain, Suriname, Venezuela|
Minister of Finance
|Austria, Belgium, Luxembourg, Turkey|
John W. Howard, M.P.
|Australia, Korea (Rep. of), New Zealand, Papua New Guinea, Solomon Islands, Western Samoa|
|6.||The Right Honourable|
Sir Geoffrey Howe, Q.C., M.P.
Chancellor of the Exchequer
Minister of Economy, Finance and Planning
|Benin, Cameroon, Central African Republic, Chad, Comoros, Congo (People’s Rep. of), Gabon, Guinea-Bissau, Ivory Coast, Madagascar, Mali, Mauritania, Mauritius, Niger, Rwanda, Sao Tomé and Principe, Senegal, Somalia, Togo, Upper Volta, Zaïre|
Minister of Finance
|Bahamas, Barbados, Canada, Grenada, Guyana, Ireland, Jamaica|
G. William Miller
Secretary of the Treasury
Minister of Economy
|11.||Honorable Major General|
Nasr Eldin Mustafa
Minister of National Planning
|Botswana, Burundi, Equatorial Guinea, Ethiopia, The Gambia, Guinea, Kenya, Lesotho, Liberia, Malawi, Nigeria, Sierra Leone, Sudan, Swaziland, Tanzania, Trinidad and Tobago, Uganda, Zambia|
Federal Minister for Economic Cooperation
|Germany (Fed. Rep. of)|
Filippo Maria Pandolfi
Minister of the Treasury
|Greece, Italy, Portugal|
Minister of Finance
|Afghanistan (Dem. Rep. of), Algeria, Ghana, Iran, Socialist People’s Libyan Arab Jamahiriya, Morocco, Oman, Tunisia, Yemen (People’s Dem. Rep. of)|
Bank of Indonesia
|Burma, Fiji, Indonesia, Lao People’s Dem. Rep., Malaysia, Nepal, Singapore, Thailand, Viet Nam|
Minister of Finance
Minister in the Ministry of Finance
|Denmark, Finland, Iceland, Norway, Sweden|
A. P. J. M. M. Van der Stee
Minister of Finance
|Cyprus, Israel, Netherlands, Romania, Yugoslavia|
Minister of Finance
|Bangladesh, India, Sri Lanka|
Cesar E. A. Virata2
Minister of Finance
|Brazil, Colombia, Dominican Republic, Ecuador, Philippines|
Annex B: Organizational and Administrative Aspects
1. The Committee of Twenty, in its final report in June 1974, recommended that two committees be set up: an Interim Committee in the Fund to deal with monetary reform, and a joint ministerial committee of the Bank and the Fund (Development Committee) to continue the study of the broad question of the transfer of real resources to developing countries.
2. It was hoped that the Development Committee would be helpful in providing a focal point in the structure of economic cooperation for formation of a comprehensive overview of diverse international activities in the international area, for efficient and prompt consideration of development issues, and for coordination of international efforts to deal with problems of financing development. The Committee was expected to work in close association with the management and the boards of the two institutions.
3. The Development Committee was accordingly established pursuant to Bank Governors Resolution 294, October 2, 1974, and Fund Governors Resolution 29-9, October 2, 1974. The parallel resolution provided that the members of the Development Committee were to be governors of the Bank, governors of the Fund, ministers, or others of comparable rank. Each member government of the Bank or the Fund that appoints an executive director or group of members that elect an executive director was to appoint one member of the Committee (in all: 20 in the Bank and 21 now in the Fund) and up to seven associates. The members were to be appointed in turn for successive periods of two years by the members of the Bank and the members of the Fund.
4. At the inaugural meeting of the Committee held October 2-3, 1974, Mr. Henri Konan Bédié, Minister of Economy and Finance of the Ivory Coast, was selected as Chairman, and Mr. Henry J. Costanzo, Executive Vice President of the Inter-American Development Bank, was appointed Executive Secretary. At the seventh meeting of the Committee, held October 6, 1976, Mr. Cesar E. A. Virata, Secretary of Finance of the Philippines, was selected as Chairman and Sir Richard King, Permanent Secretary of the Ministry of Overseas Development of the United Kingdom, was appointed Executive Secretary. Mr. Virata was re-elected as Chairman on September 27, 1978 at the eleventh meeting of the Committee.
5. The organizations listed below were official observers to the Development Committee during 1979-80. In addition, the Government of Switzerland was represented by an observer.
African Development Bank
Arab Bank for Economic Development in Africa
Arab Fund for Economic and Social Development
Asian Development Bank
Commission of the European Communities
Development Assistance Committee
European Investment Bank
General Agreement on Tariffs and Trade
Inter-American Development Bank
International Fund for Agricultural Development
Islamic Development Bank
OPEC Fund for International Development
Organization for Economic Cooperation and Development
United Nations Development Program
United Nations Conference on Trade and Development
The text of the parallel IBRD and IMF Resolutions establishing the Development Committee is reproduced in Summary Proceedings, 1975, pages 278-82.
Annex D: Agendas and Press Communiqués of Meetings held in September 1979 and April 1980
Meeting of September 30, 1979
Financial Flows to Developing Countries and the Adjustment Process
Stabilization of Export Earnings
1978/79 Annual Report
Working Group Report on Multilateral Development Institutions
Working Group Report on Private Direct Foreign Investment
Special Action Program
Restrictions on Access to Capital Markets
Future Work Program
Press Communiqué (text published in Summary Proceedings, 1979, pages 307-11).
Meeting of April 24, 1980
Program Lending for Structural Adjustment
Increasing the Repurchase Period of the Extended Fund Facility
Reduction of Costs of Using the Supplementary Financing Facility
Preliminary Report from the Chairman of the Task Force on Nonconcessional Flows
Interim Report from the Chairman of the Task Force on Private Foreign Investment
Group of Twenty-Four Program of Immediate Action on International Monetary Reform
Report of the Brandt Commission
1. The Development Committee held its 13th meeting in Hamburg, Federal Republic of Germany on April 24, 1980 under the Chairmanship of Mr. Cesar E. A. Virata, Minister of Finance of the Philippines, and with the participation of Mr. J. de Larosière, Managing Director of the International Monetary Fund, and Mr. Ernest Stern, Vice President, Operations, of the World Bank. Sir Richard King, Executive Secretary, took part in the meeting which was also attended by representatives from a number of international and regional organizations and Switzerland as observers.
2. The Committee considered papers submitted by the World Bank on lending for structural adjustment and on cofinancing, and a progress report by the IMF on recent developments relating to Fund facilities. They also received preliminary reports from the Chairmen of the two Task Forces on Nonconcessional Flows and on Private Foreign Investment. On the basis of a staff study by the Bank and the Fund, the Committee reviewed recent developments relating to the proposals of the Group of Twenty-Four for a Program of Immediate Action, which the Committee at its meeting in Belgrade had agreed to keep in view. The Committee had a preliminary discussion on the report of the Brandt Commission.
3. The Committee noted with concern that the general impact of the high level of world inflation, including the increase in energy and other prices, and the weakening of demand for developing country exports due to the slowdown of economic activity in the industrial countries, are leading to large current account deficits and placing an increasing burden of adjustment on many non-oil developing countries. Recent developments in international financial markets have made it more difficult and expensive for developing countries to secure appropriate long-term financing for their development programs. Their debt service burden could only be expected to grow further given the large dependence of the middle-income countries on nonconcessional public and private financial flows. The Committee also noted that the present flows of concessional official development assistance were inadequate to meet the essential requirements of the poorer developing countries and unless urgent action is taken their condition will further deteriorate. The Committee therefore emphasized the pressing need for an increase in ODA directed toward achieving the target of 0.7 per cent of GNP. It reaffirmed its intention to consider at its next meeting the issue of ODA flows, both present and prospective, on the basis of a staff paper. Against the background of a generally deteriorating international economic environment, the Committee re-emphasized its earlier call for a reduction of protectionist trade measures which adversely affect the exports of developing countries, and stressed the need to avoid restrictions on access to capital markets.
4. The Committee welcomed the initiative taken by the Bank to provide assistance through structural adjustment lending on appropriate terms and conditions for developing countries which face difficult medium-term prospects in their balance of payments. Members recognized the contribution that could be made through this type of non-project and program lending both to the rapid transfer of adequate resources and to the active pursuit of appropriate structural policies in the developing countries. Governments and the Bank were urged to give prompt attention to this subject, and Members agreed to review progress in this respect at their September meeting.
5. The Committee recognized that it was important to expand net private capital flows in the period ahead. It noted that while there had been substantial growth in recent years in cofinancing by the Bank with official aid agencies, export credit institutions, and private lenders, the volume was still insufficient compared with the needs. Noting that the Bank was already exploring several new approaches to attract funds for cofinancing from a wider range of private sources, Members urged that efforts be continued to improve the effectiveness and the volume of these financial flows in ways that would meet the objectives of the borrowing countries.
6. The Committee welcomed the recent decision by the Executive Board of the Fund to increase the maximum repurchase period under the extended facility from eight to ten years, and to reduce the number and frequency of repurchase installments; the combined effect of these measures will increase the average life of a drawing outstanding under the extended facility by almost one fifth. This action will spread the adjustment effort over a longer period and lessen the financial burden of using the extended facility. The Committee recognized that the Fund should continue to follow a flexible approach as regards the volume of drawings under the supplementary financing facility in cases where additional amounts are justified by the magnitude and nature of a member’s need for financing. The Committee expressed the hope that at an early date measures would be taken to reduce the cost of using the supplementary facility and in this way ease access to the facility.
7. The Committee welcomed the steps being taken by both the Bank and the Fund to adapt and expand their activities to meet the needs of countries affected by the increasingly difficult economic situation. While recognizing that each institution has its own character and function which should remain distinct, they emphasized the importance of close collaboration between the two institutions.
8. The Committee welcomed the progress that had been made toward providing additional capital resources for the World Bank and the regional development banks, and the agreements reached on the replenishment of IDA under the Sixth Replenishment. However, Committee Members expressed concern that legislative difficulties now threatened a hiatus in the commitment authority of the multilateral development institutions, and urged that member governments take all necessary actions to ensure continuity in their operations. Action was particularly urgent in regard to IDA-VI, since resources available from IDA-V will be exhausted by June 30. Equally urgent are actions concerning the replenishment of the Inter-American Development Bank and the increase of the concessional funds of the Asian Development Bank. The Committee further noted that additional resources had been pledged to the OPEC Fund, and that aid commitments under the Lomé II convention had been increased.
9. The Committee noted that at the time of its next meeting there would be available a final report of the Task Force on Private Foreign Investment, and a progress report of the Task Force on Nonconcessional Flows. Members stressed the extreme importance of the review of private financial flows to determine what measures could be taken to facilitate additional flows on appropriate terms and to improve access of a wider range of developing countries to private capital markets.
10. The Committee welcomed the publication of the Brandt Commission Report and viewed its recommendations as a useful basis for consideration by the international community. The Committee noted that a number of the recommendations related to the Bank, the Fund, and the regional banks and that these institutions are currently examining these recommendations. They requested that specific papers should be prepared on those recommendations of the Commission’s report that were of particular relevance to the Committee’s work.
11. The Committee reviewed the current state of discussions relating to the Group of Twenty-Four Program of Immediate Action for International Monetary Reform. While recognizing that international agreement had been reached on some of these proposals and that some others were under discussion, they nevertheless stressed the importance of reaching early agreement on other items of a developmental character, an increase in the volume of official development assistance, completion of the processes for the Sixth Replenishment of the IDA and a significant increase in the amount of program lending.
12. The next meeting of the Committee will be held in Washington at the time of the Annual Meetings of the Governors of the Bank and Fund in September 1980.
13. The Committee expressed their warm appreciation to the Government of the Federal Republic of Germany for their hospitality and for the excellent arrangements provided for their meeting.
1. The Joint Procedures Committee met on September 29 and 30 and October 1 and 2, 1980 and considered documents distributed at the meetings.
2. The Committee decided, in the light of the discussions at the meetings, to forward to the Boards of Governors the attached draft resolution entitled “The Application of the Palestine Liberation Organization for Observer Status.”2
|/s/Amir H. Jamal||/s/J. Anson|
|Tanzania—Chairman||United Kingdom—Reporting Member|
Report I and the Resolutions recommended therein were adopted by the Board of Governors of the Fund, in Joint Session with the Boards of Governors of the Bank, IFC and IDA, on October 3, 1980.
See pages 27-30.
Resolution No. 35-10; see page 318.
Resolution No. 35-11; see page 318.
Egypt, Democratic Kampuchea, Rwanda, and South Africa did not participate in this election.
The amounts will be inserted on December 31, 1980, following their calculation in accordance with the procedures set out in the Annex.
Report II dealt with the business of the Boards of Governors of the Bank, IFC and IDA. Report III and the recommendations contained therein were adopted by the Boards of Governors of the Fund and of the Bank, IFC and IDA, in Joint Session, on October 3, 1980.
The Honorable Eduardo Fernández P., Governor of the Central Bank of the Dominican Republic, served as Alternate Member to permit the Honorable Cesar E. A. Virata to serve as Chairman
Report IV and the Resolution recommended therein were adopted by the Boards of Governors of the Fund and of the Bank, IFC and IDA, in Joint Session, on October 3, 1980.
Resolution No. 35-12; see pages 318-20. The Bank parallel Resolution No. 363 is published in the Bank, IFC and IDA Summary Proceedings, 1980.