Statements Bearing on Fund Policy, Delivered at the Annual Discussion of the IBRD, IFC, and IDA1

International Monetary Fund. Secretary's Department
Published Date:
November 1963
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Statement by the Governor of the Bank and Fund for Uganda—A. Kalule Sempa

I am glad of this opportunity to express the pride and pleasure of my Government in taking its part, for the first time, as a member of these great institutions.

Uganda’s thanks are due to the staff of the Fund and the Bank for their assistance in enabling my Government to complete the application procedures in time to assume membership at these meetings. We are particularly grateful to the United Kingdom’s Executive Director and his staff for their invaluable help in sponsoring our application.

Sir, I feel it is best for a new member to say little and try to learn much! My remarks will therefore be brief.

By far the largest part of our subscriptions (small by international standards, but massive for us) has, of course, gone to the Fund. The Fund’s purposes are principally to correct short-term balance of payments difficulties. Uganda’s problem is not, however, so much the balance of its payments as the inadequate over-all level of its trade earnings.

If one went by the press reports, one might be forgiven for imagining that the principal preoccupation of these meetings is the task of underpinning the massive payment transactions of the developed nations. In fact, I have no doubt of the wide appreciation on the part of wealthier members of the need to adapt and extend the activities of our institutions, not just to redress the balance of international payments, but also to correct the imbalance of international prosperity.

Countries such as mine have a small voting power, commensurate with our small wealth. In a way, however, our claims on the international community are in inverse proportion to our shareholdings.

These annual meetings are not the time for detailed discussion of the remedies for these problems. I know that the Directors and staff of the four organizations will continue to pursue with Governments such as mine the means by which they can help us forward.

I trust there will be a growing awareness, not only of our need for financial assistance, but also of the help we require in overcoming the technical and administrative obstacles to putting our development plans into effect.

The Uganda Government, for its part, has made clear to our people that the main effort and contribution must come from Ugandans themselves. They must accept the call for hard work, for sacrifices and for realistic producer prices. The people of my country will, however, ultimately despair in their attempts to improve their lot, in friendly association with the developed countries, if they do not see early and concrete evidence of positive and understanding assistance from the Fund, and—more immediately—the Bank and its two allied institutions. I am confident that the people of Uganda—and of other new and underdeveloped countries—will not be disappointed.

Statement by the Governor of the Bank for Morocco—Driss Slaoui

This year’s meeting of our institutions has many new and valuable lessons to offer us. It may be that the fact that I am addressing this assembly for the first time makes me especially aware of this.

Two men have left us this year, and both have marked the Fund and the Bank with the imprint of their own greatness. Mr. Jacobsson left us in distressing circumstances, and we deeply regret his passing. For the last six years of his life, he contributed to the strengthening of an international monetary system previously exposed to the free play of every form of imbalance, and helped to bring about the rehabilitation of the whole range of currencies; he gave the International Monetary Fund a vitality and an influence that have enabled it to face, within the framework of international cooperation, the special problems of the key currencies and those associated with development measures.

However, States like ourselves, which are confronted with the inexorable problems of development, are no strangers to the debate on international liquidities. The monetary reserves of our States are expressed in convertible key currencies, and the paucity of our holdings of these makes us all the more concerned with their values. Certainly Morocco has, for its part, succeeded in maintaining a satisfactory volume of external assets, but in the case of the nonindustrialized States a general falling tendency continues to manifest itself, and their over-all position, despite all the movements of foreign capital, has worsened still further by some $600 million.

Everything that can be done by the Fund to exert a better control over the dominant trends influencing the world’s economy will therefore be favorably regarded by our country.

Mr. Schweitzer, whom I welcome to his new appointment, yesterday defined a number of objectives for world monetary order to which I subscribe: full employment, growth without inflation, maintenance of the value of currencies, expansion of international trade. It is for the Fund to continue to engage in the reconciliation of those objectives that may be in conflict, even though it has already succeeded today in dispelling the illusions of an inflationary expansion.

This year the Fund has decided to intervene on behalf of primary producer States suffering from a temporary deficit in their exports. It is clear that we are still far from the contracyclical policy at which we should one day arrive. Morocco feels a close sense of solidarity with the primary producer countries: the fall in the price of a number of minerals has led directly to a fall in mining output at the same time as phosphates and petroleum production were markedly increasing; on the other hand, iron production has fallen by 21 per cent, manganese by 18 per cent, and zinc by 14 per cent. If we also take into account the uncertainties of agricultural output, which are a significant factor in countries in which three quarters of the population are engaged in agriculture, it is evident that unless there is a remodeling of the economy, exports will tend to languish and import needs will always impose a heavy strain. No monetary policy can alone prevail against such tensions, save when it is conceived as an aid to a general development policy.

The need for an international monetary order accountable to the Fund is becoming increasingly clear. Mr. Schweitzer has referred to the barriers still raised by many industrial countries against the products of the underdeveloped countries, barriers that jeopardize both their balance of trade and their efforts to industrialize themselves. International trade, capital movements and investments, all naturally tend to favor those countries that are already industrialized—resulting in the disparity of growth that is constantly being more vividly demonstrated. This is at the root of all the reservations that we encounter amongst those countries that are not yet sufficiently developed in their progress toward freer trade, and with respect to various regional groupings. It is on the Fund, moreover, an institution standing above all States and all special interests, that we must necessarily base our hopes for the future.…

Statement by the Governor of the Bank for Somalia—Abdulcadir Mohamed Aden

Once again it gives me great pleasure to address the distinguished delegates at this all important meeting. But one can see that immense changes have taken place since last year. It is with deep sorrow and regret that we note the loss of the late Per Jacobsson to our institutions.

I share the sentiments expressed in the previous addresses welcoming Mr. George D. Woods to the leadership of the Bank and its affiliates, the International Finance Corporation and the International Development Association, and Mr. Pierre-Paul Schweitzer to the management of the Fund. We look forward with confidence that Messrs. Woods and Schweitzer will bring talent and initiative to their challenging tasks.

There could not be stronger faith placed in these institutions as the keys to world development and stability than the joining of twenty new members and one applicant for membership. On behalf of my Government, I extend my sincere greetings and warm welcome to these countries, which are mostly from the emerging continent of Africa. This same faith that made Somalia become a member of these institutions this time last year has been further strengthened by the visit to our country of missions, both from the Fund and the Bank.

I can go still further by saying that we have already seen the results of the Fund mission in the form of concrete contributions to the solution of our monetary problems. We were glad to note that the Fund confirmed the soundness of our monetary policy in maintaining world confidence and the stability of our currency. Concerning the World Bank mission, though we had useful consultations on our development problems and the Bank’s lending criteria, the mission has not yet published its report. In this instance I would like to take the opportunity to reaffirm my country’s optimistic confidence in the outcome of these consultations, especially as we heard Mr. Woods’ policy indicating that more consideration will be given to meeting the needs of the Bank’s less developed members.

Since last year we have made considerable progress in meeting our problems of economic and social development. We have implemented some projects of social and economic significance, and recently our first five-year plan has been officially released. Though the plan is modest by world standards, we hope to achieve by it a certain level of diversification and create the infrastructural background to development.

It is a well-known fact that the less developed countries cannot achieve the required standards of living without the accommodation of their capital and technical needs by the international institutions and the industrialized countries. This can take not only the form of aid and loans but also (and in my view more important) the form of private investments and access of their primary and processed goods into the markets of industrialized countries. Here we hope that, despite prevailing political and economic differences, there can be worked out a detailed formula for balancing the present trade terms in the forthcoming United Nations Conference on World Trade.

It is expected from the Conference that we squarely face the responsibility for creating a world whose resources are managed in such a way that its inhabitants get a fair share that would enable them to reach a reasonable social and economic standard of living. Here the responsibility is three-cornered for (a) the international institutions as guided by the charters; (b) the developed countries, which have the responsibility to help the developing countries by provision of capital and skill and by the removal of the discriminatory barriers to primary and processed products of these countries; (c) it is the responsibility of the developing countries to create a healthy atmosphere for the attraction of foreign capital and skill, and it is also their responsibility to formulate sound policies for efficient use of their available resources toward improving the social and economic standards of their peoples. The development of these countries is not only beneficial to themselves but also to the industrialized communities, for the release of these potentialities is surely accompanied by a release of new markets. …

When the Bretton Woods Agreements were signed in 1944, we were faced with the task of reconstructing a world that had been devastated by war, and of reshaping an immeasurably disfigured world economy. Today we are faced with no less responsibility.

Today the task before this assembly of world financiers is what we can do to eliminate poverty and instability from our planet. The indicator here points, before everything, to the necessity for the removal or lessening of the disparity that exists between the developed and developing countries, which can be achieved by their collaboration within these institutions.

Statement by the Governor of the Bank and Alternate Governor of the Fund for Argentina—Luis María Otero Monsegur

I wish to express on behalf of my country, the Republic of Argentina, the satisfaction with which we have read the Annual Report of the International Monetary Fund. From its pages it is clear that a large part of its work is devoted to the problems of the less developed countries, with which it has carried out considerably more transactions than it has with the industrial countries. To this can be added the facility for the compensatory financing of fluctuations of commodity exports, which has already been put into operation.

We are also pleased to note the efficient work of the Fund, other international organizations, and central banks in maintaining the liquidity of the Western financial system. This action affords additional proof of what can be done in this broad area when there is cooperation and good will among countries for seeking reciprocal facilities which will definitely lead to the expansion and balanced growth of world trade and its corollary, the maintenance of high levels of employment and increasing levels of income. …

At meetings of this kind it is useful to analyze the experience acquired in the relations of member countries with the Fund in view of the interesting conclusions that can be derived from them.

When stand-by arrangements are concluded, one begins by accepting the principle that a stabilization policy, by checking inflation and maintaining the value of the currency and prices, will strengthen and stimulate the initiative of the country’s financial organizations, which will then put into motion investments and development processes consistent with the principles of a competitive economy.

But monetary stability in a developing country may stimulate investment beyond the level of the available domestic and foreign capital resources. In such cases something may happen which bears a certain resemblance to what a distinguished Governor of the Fund has called “imported inflation.” There may be an excessive inflow of foreign funds, in response to high interest levels.

Such inflow leads to monetary expansion, which may over-stimulate the demand for domestic and imported products. The consequence might be a weakening of the international payments position, which again produces a reversal of the process: an outflow of funds which by contracting the domestic money supply will raise new stresses in the market.

This happens time and again without adequate and timely remedial action being taken, because the developing countries lack adequately organized money and capital markets. It is for this reason that a policy which puts the exclusive accent on stability, and expects everything in the field of development to happen as a secondary effect of that stabilization process, appears to be incomplete in that it is only geared to suppressing the most evident factors of disturbance, but does not provide the framework required to keep the economy in sustained balance. What is lacking is a mechanism which will ensure growth based on adequate financing.

It would seem desirable, therefore, that in the future a development program sustained by long-term loans should start together with the stabilization program. Thus, the time lag between the faster process of stabilization and the slower pace of development may be reduced and bridged, thereby preventing stagnation of production and underemployment from unleashing political and social pressures that might seriously jeopardize monetary discipline.

Though the final success of such a program will necessarily depend upon, and be the responsibility of, the Government of the country concerned, the Fund and the Bank, by concerted action, can greatly assist in the Government’s task. The assistance the Bank has granted to member countries with the cooperation of other specialized international institutions in organizing international consortia with a view to long-term financing may be hailed as a decisive step in the right direction.

Another problem which should be emphasized is that of the external debt of developing countries.

A prerequisite for any policy of monetary stabilization and economic development is the readjustment of the structure of the external debt, principally by means of an adjustment of maturities according to the debtor country’s estimated ability to repay its obligations and the support which it should give to new activities. This is essential, not only for inspiring confidence in the currency at times when reserves are scarce and the stabilization program is being started, but also for attracting from abroad the new capital necessary for development. That is how the Fund sees it. In considering a stand-by, it indicates the measures to be taken and the policy to be followed in that connection, so that it indicates, over and above the credit to be granted, the road to be followed by the creditor governments and the banks.

But it is here that uncoordinated action occurs. Negotiations are initiated which, although they lead to the desired results, are reached only after losses of time at a critical moment for the debtor country and delays in execution which detract from the effectiveness of the concessions granted. Through this procedure, the debtor country may be forced to make full payments on its debt—just at the time when the exchange crisis is most acute, and when it can least afford a reduction of its reserves—in order to obtain a repayment on the basis of the adjustment envisaged in the agreement when its position has improved.

All this suggests the need for a closer coordination between the approval of a stand-by by the Fund and the conclusion of debt agreements by creditor countries. There should be many ways to coordinate these measures so that the refinancing of a country’s obligations can be negotiated pari passu with the stand-by.

These are some ideas intended solely to improve, if possible, the procedures of the International Monetary Fund and the World Bank.

I conclude with a remembrance of Per Jacobsson. My country does not forget his penetrating and acute capacity for understanding and the interest he felt for our financial and monetary difficulties.

To Per Jacobsson we grant the respect due to one of the great builders of today’s world.

Statement by the Governor of the Bank and Fund for Mali—Jean-Marie Kone

I take particular pleasure in addressing this distinguished gathering, which the Republic of Mali attends for the first time as a member. My Government has always followed with sustained interest the activities of the international finance agencies whose highest officials are met here today. We are familiar with the essential role that the International Monetary Fund, the International Bank for Reconstruction and Development, and its affiliates have played in monetary and financial cooperation on a world-wide scale. We are equally aware of the very special attention brought to bear upon the problems of the developing countries—Mali is one of these. Mali wishes and hopes to see the field of action and the scope of the activities of the IMF, the IBRD, and the IDA extended still further, so that these agencies may perform their full role as world coordinators in the monetary and financial sphere.

It is also my agreeable duty to express to our hosts my Government’s gratitude for the reception given to my Delegation. I wish to thank particularly the permanent staff of the IMF and the IBRD, whose dedication and competence greatly facilitated Mali’s admission to membership.

My Delegation did not have the privilege of being a member of the IMF during the period when it was headed by the lamented Mr. Per Jacobsson, whose untimely death we regret. We are confident that the best of working relationships and cooperation will be established between our country and the World Bank under the enlightened guidance of its new President, Mr. Woods, and with the Fund, whose management is entrusted to the distinguished financier, Mr. Schweitzer. …

My delegation is grateful to the authorities of the Fund for having again brought up the painful problem of deterioration of the terms of trade for the developing countries. As a result of the price disparity between industrial products and raw materials, this unfavorable movement, by increasing the difficulties of the balance of payments, directly affects the problems with which the IMF is concerned. But it also affects the IBRD and its affiliates, for in the face of the demands for imports of consumer goods, there is a risk that imports of capital goods may be sacrificed. This would, in the long term, worsen the economic situation of the country in question and set off one of the well-known and numerous infernal cycles of underdevelopment. My country would like the financial institutions meeting here to attack this problem with the necessary vigor and suggest concrete solutions that are capable of providing a remedy for it.

Mali is deeply appreciative of the effort of the Fund to study and solve the problems of international liquidities. As a newcomer among you, I shall not linger over the facts of the problem. My country hopes that the discussions of this subject will take place in a vast international forum like this. It is important to understand that the repercussions of monetary decisions are often far greater than may at first be thought. The underdeveloped world has too often suffered in the past from monetary decisions taken unilaterally by some industrialized country.

In this regard, I shall add parenthetically that it seems to me highly desirable for a large number of the new member countries from Africa to make an effort to ensure the distribution of all documents in French, so that we may intelligently follow the discussions in progress…

Statement by the Governor of the Bank and Fund for China—Chia-Kan Yen

This year it is again my good fortune to attend the Bank-Fund Annual Meeting in Washington. The setting is familiar, but, to me, this trip has added significance. Both the Bank and the Fund have new men at their helms, George D. Woods and Pierre-Paul Schweitzer are names to conjure with in the financial field. I am happy for this occasion to meet them and to talk business with them in person. I am deeply impressed by the breadth of their views and the freshness of their outlook. I can confidently predict that, in time, they will enlarge upon the edifice that their famous predecessors, Eugene R. Black and Per Jacobsson, had built, and the institutions they represent will perform ever greater service toward world economic development and cooperation. I wish to take this opportunity to express our sense of profound regret upon the loss of the great service of the late Per Jacobsson to the world.

The accomplishments of the Fund, the Bank, and the Bank’s affiliated organizations are many and varied. Here, I can do no more than a most cursory discussion of some of their problems, with emphasis on the experience of my own country.

Starting with the Fund, we have witnessed a year of intensified international monetary cooperation. As a result of substantial borrowing arrangements made by the Fund and an increasing volume of swap currency agreements, a greater degree of equilibrium in world payments has been achieved. We support coordinated efforts to study international liquidity problems. The recent decision on compensatory financing of export fluctuations, which will extend the Fund’s support to member countries suffering from fluctuations in receipts from exports of primary products, has our warm support. We also welcome the management’s proposal to establish a new service to give technical assistance to member countries with regard to fiscal problems and central banking.

As we all know, the Fund has been providing expert advice to members on their exchange and restrictive systems, through individual annual consultations. This year, my country has been fairly successful in its export promotion efforts and export proceeds have substantially increased. My Government is thus in the happy position to act in line with the Fund recommendations by abolishing the exchange certificate system, effective September 30.

In closing, may I add that we are very happy that the Annual Meeting next year will be held in Tokyo. We are only three hours’ flight from Tokyo, and may I take this opportunity to extend a standing invitation to all my fellow Governors, their associates and guests, to visit us in Taipeh. We shall do everything possible to make your visit comfortable and rewarding.

Statement by the Governor of the Bank and Fund for Ghana—F. K. D. Goka

I must first join my colleagues, who have already addressed the meeting, in paying tribute to the memory of the late Managing Director and Chairman of the IMF, Mr. Per Jacobsson, to whom we owe the present unique position of the Fund in the international financial system. I also wish to take this opportunity to congratulate and to welcome Mr. Pierre-Paul Schweitzer, and to offer promises of our cooperation and good will in the performance of his arduous tasks. Nor should I fail to mention, on this occasion, our sense of gratitude and appreciation for the services of the Bank’s ex-President, Mr. Eugene Black, through whose instrumentality the name of the World Bank and its affiliate institutions have become household words in the developing world. We also welcome to his seat Mr. Woods, of whose capacity to direct the affairs of our Bank there can be no doubt.

I wish to extend a warm welcome to the twenty new members who have joined our organization since the last annual meeting. We look forward to the time soon when all the people of Africa, represented by their democratically chosen leaders, will be able to participate in the work of these institutions.

Ghana’s main problem in the past few years has stemmed from the imbalance in her external trade and payments, due mainly to the deterioration in her terms of trade, the rapid rise in imports due to the needs of her developing economy and, more recently, to the high rate of service payments on loans received for development. In the past five years, Ghana’s development efforts have resulted in an increase of 85 per cent in the volume of her exports. But during this period the average price of her exports has dropped by 42 per cent. The prices of imported manufactured goods, on the other hand, have continued to rise. These developments culminated in a current payments deficit of £G 52 million in 1961 and £G 28 million in 1962. These balance of payments deficits have had to be countered by measures such as import restrictions, exchange controls and restraints on Government development spending, which have only resulted in a general slowing down of the economy.

Like other developing countries, Ghana has tried to modify the adverse impact of the collapse of export prices by encouraging an inflow of foreign capital both public and private. The bulk of the capital has been provided from private European sources. Unfortunately, it is obtainable at such high cost and for such short periods that its net contribution to the balance of payments is already beginning to fall. Efforts to find capital on more favorable terms seem to be frustrated by certain arrangements that the capital exporting countries have made among themselves. Until these restrictive arrangements among the major lending countries are reviewed, the very welcome efforts of the international institutions to liberalize the conditions of their assistance to the developing countries will be of little avail. Is it too much to suggest that the advanced countries should carry the policies which they are applying through the Fund, the Bank and its associated agencies into their own bilateral capital transactions with the developing countries? …

We all know that an even more fundamental solution to balance of payments problems, such as ours in Ghana, is to improve our export earnings. In the past year we have seen no great improvement in the policies of many developed countries to assist developing countries in this regard. We wish to reiterate our firm opposition to the illiberal and inward-looking policies of many developed countries, especially where, as in the European Common Market, they take the form of discriminatory trading practices. The discriminatory barriers erected by the member countries of the European Common Market against our exports have only been marginally modified. There are still in these countries and in others formidable obstacles imposed against exports of manufactured products derived from our own raw materials. Other impediments to an increased consumption of cocoa and other Ghanaian products remain unchanged.

Commodity arrangements have been widely advanced as a solution to the adverse terms of trade and other export problems that the developing countries are encountering in the course of their development. Ghana and other developing countries therefore eagerly supported the proposal to call a conference to negotiate an International Cocoa Agreement to achieve some of these purposes. The conference is now meeting in Geneva. But I am sorry to report that from the preliminary indications given by them the advanced countries do not seem to be seizing the opportunity of these negotiations to translate the new policies on international commodity trade into actual practice.

In Africa, we are trying to further our unity and our mutual economic development by forming an African Common Market. The African Common Market is not directed against any other countries and will not engage in discriminatory practices as between nonmember countries. Its purpose is to create a better basis for our economic development by consolidating existing national markets into an economically more viable unit which can support a high degree of efficient industrialization. …

President Kennedy, Mr. Schweitzer, and some of my fellow Governors have rightly stressed the need for new international arrangements to provide for facilities to deal with short-term fluctuations in balances of payments and to finance an increased volume of international trade. In this regard, my Delegation finds considerable merit in the proposals made last year and repeated this year by the Governor for the United Kingdom. Ghana fully supports these moves and hopes that they will lead to early action.

It seems to us, however, that the suggested new arrangements can at best serve only as supplements to more basic solutions, such as commodity agreements and freer access to world markets.

In the past year, the Ghana Government has taken a number of steps to stimulate the inflow of foreign capital. Our new Capital Investments Act, which has been widely acclaimed as a model, offers substantial inducements to investors. It also incorporates guarantees against expropriation and, in this connection, I am happy to record that we have made provision for arbitration through the agency of the World Bank for the settlement of any investment disputes. Moreover, our new National Investment Bank is intended, among other things, to provide machinery for fruitful cooperation between local and foreign capital in the development of our national resources.

In conclusion, I would like to express again the appreciation of my Government for the efforts that are being made by the Fund, the Bank, and associated institutions to evolve new policies to deal with the problems of the developing countries.

Statement by the Governor of the Bank for Pakistan—M. Shoaib

The Pakistan Delegation would like to join you and other Delegations in expressing our deep regret at the passing away of Mr. Per Jacobsson. His death has removed from our midst an international financial statesman of the highest calibre. His dynamic leadership and keen insight into the problems confronting the world economy have enhanced the stature and prestige of the Fund.

In this annual meeting we also miss very greatly the presence of Mr. Eugene Black, under whose guidance and leadership the World Bank reached its present eminence.

We welcome Mr. George Woods, who has taken over as the President of the Bank and has already brought his varied experience and outstanding abilities to bear on the operations of the Bank. We wish him all possible success in the difficult and onerous responsibilities assumed by him, and may I also say that we feel very enthusiastic about the proposals he has made for widening the Bank’s horizons. His first speech to this annual gathering will, I am sure, prove a distinct milestone in the evolution of the Bank’s policies. We also welcome very warmly the new Managing Director of the International Monetary Fund, Mr. Pierre-Paul Schweitzer, and wish him all success in his new assignment for which he is so well equipped. …

In our view a solution to the problem of ensuring equitable terms of trade to the developing countries is of crucial importance. We welcome the recently introduced compensatory financing arrangements made by the International Monetary Fund for stabilization of export earnings of primary products of the underdeveloped countries. We recognize, however, that these arrangements are of limited utility and could only provide for short-term cyclical changes. Unless an improvement in the export earnings is foreseen, the scheme would act as a palliative for a limited period only, and might indeed aggravate the position when repayments become due. A more effective solution of this problem will have to be found, which could enable funding of the additional gains made by the industrialized nations at the expense of the agricultural countries owing to changes in their terms of trade. This fund could then be utilized to compensate the suffering country for the losses incurred through having to market its products for inadequate consideration. We suggested this in 1960 and, despite the studies carried out in the United Nations and here, we are still far from a solution to the problem.

In the long run, two-way traffic in trade on equitable conditions is the only way for accelerating development of underdeveloped countries. Developing countries need markets, not only for their primary commodities, but also for their simple manufactures. If they are prevented by tariffs and quota arrangements from finding markets in the more developed countries, they cannot earn the money to service and repay development loans. Instead of shutting out the labor-intensive products of the underdeveloped countries, the more developed countries should carry out structural changes in their industries so as to concentrate on more sophisticated production.

The Report of the International Monetary Fund has rightly pointed out that “one of the biggest contributions that the industrial countries could make to the less developed countries would be to remove all barriers to importation from the latter countries. If this were done simultaneously by all industrial countries, the hardships inflicted within those countries would be considerably reduced.”

If the richer countries were to make a determined move to shape their commercial policies a little more in the interest of the underdeveloped countries, this could be a most useful adjunct to any aid program. What is needed is a rationalization of the current pattern of international trade so as to allow the developing countries to draw full benefit from the international division of labor. The idea of reorganizing the pattern of world production and trade may, in the beginning, appear as Utopian, but I think it is not beyond the possibility of realization if it is pursued with determination and mutual good will. At this stage, the proposition calls for an extensive survey of the resource-pattern of various countries to permit objective assessment in relative terms. Once this is done, it should be possible to determine its feasibility.

Such a new arrangement would confer economic benefits not only on the underdeveloped countries but also on the developed countries. For one thing, there would be less pressure on foreign aid, as the enlarged volume of trade would result in an accretion to the real resources of the developing countries. Besides, the underdeveloped countries would become less sensitive in an environment which would permit the development of export markets for those products which they are able to produce cheaply. This might also put a stop to unnecessary bickering resulting from unhealthy competition. Quite conceivably, such reforms might entail a limited redistribution of income in the initial phase, but it needs to be emphasized that the underlying plea is not just for a static redistribution of income between the rich and the poor nations, but rather for a better sharing of opportunities which would make all countries richer.

Such a rationalization of production potentials will understandably take a long time. In the meantime, the developed countries can render a signal service by bringing about a phased dismantling of current restrictions on the import of goods from the underdeveloped countries, particularly their manufactures. The developed countries should, on their part, move increasingly towards the manufacture of more sophisticated and complex products requiring scientific knowledge and technological skills of a high order. Painful though it may be, such an adjustment will also be in the ultimate interest of the industrial nations, which will be able to obtain the simpler consumer goods at reasonable cost while specializing in those technical products where their comparative advantage is the greatest. In any event, the problem of adjustment for the developed countries, which such a shift entails, should be no more intricate and costly than the formidable task of setting the wheels of economic development in motion in tradition-bound societies.

The restraining influence of the slow growth in exports on economic development is illustrated by the experience of my own country. In past years, our industrial development was largely for import replacement. However, as we have progressed industrially, we have to depend increasingly on manufactured and semimanufactured goods for expansion in our exports. Although, under the impact of economic development, the pattern of our exports has already undergone a significant change and the share of manufactured goods in total exports has risen considerably, further expansion in these exports is being impeded by the limited access to the markets of the developed countries. We hope that negotiations which began at the Ministerial Meeting of the General Agreement on Tariffs and Trade in May 1963 will lead to greater understanding of the problems of less developed countries.

Stress has been laid on the desirability of removing discriminatory currency policies, quantitative restrictions, and multiple exchange rates employed by some of the less developed countries. This is no doubt the ideal toward which each country should try to move as far as possible. However, it needs to be appreciated that some of these devices are forced upon countries for want of an expanding export market. Instead of pressing for drastic reform in the trade and exchange systems of the developing countries, perhaps a more fruitful endeavor on the part of the Fund would be to devise and promote methods of ensuring a larger market for their export products.

To enable the developing countries to go ahead with their plans of development, the developed countries have come forward with generous assistance and aid. In many cases, however, such aid is of a “tied” nature—tied to purchases within the country giving the aid—and is, therefore, in effect in the form of inconvertible currency for purchases at noncompetitive prices. Certain countries compensate for this “tying” by softer loan terms, but in many cases this so-called “aid” is in the form of commercially tied loans. It seems to us that, to enable the developing countries to repay tied loans, it is necessary to examine whether repayment cannot also be of a “tied” character, repayable from the increased production of the aided countries. This problem needs to be carefully examined, and we hope that with the technical skill and good will that exists in the Bank, it would be possible for it to propose a solution to this problem which would be to the mutual interest of the aiding and the aided countries of the world.

Before I close, may I say also that I am in complete agreement with my fellow Governors in urging the need for an early study of the problems of international liquidity, and my Delegation expects that concrete proposals will be available for consideration at the annual meeting next year.

Statement by the Governor of the Fund for Senegal—André Peytavin

Since the last meeting of these international financial institutions, a large group of African countries have become members of this organization. Among some one hundred nations which are now members, about one third are developing African nations.

The adherence of the African countries, which come to the international financial institutions with serious and substantial development problems, is a significant act of faith in international financial cooperation and a mark of great hope in the effectiveness of the financial technical assistance which they believe these institutions can provide. Effectiveness implies, however, that the general conception of aid and the particular conditions on which it is granted will continually be adapted to the specific development needs of member countries, both new and old. This is true both in regard to aid for economic development and in the particularly sensitive area of compensatory financing of fluctuations of exports of primary producing countries.

In the field of balance of payments equilibrium, the African economies are particularly vulnerable, for they are still very largely based on production and sale of raw materials and are closely dependent on prices on international markets, which are too often unfavorable to them.

To be sure, certain industrial nations are willing to aid the underdeveloped countries and to devote a not insignificant percentage of their national income to them, but at the same time, they shut their eyes to the simple fairness of the proposition that raw materials should be sold at prices which enable producers to make a living. However, it would not be very difficult to set up an international organization of commodity markets. Some nations go further; they disorganize commodity markets by dumping their products, which weighs heavily on international prices. Need I say that I am thinking of soy oil, a by-product of soy flour, which, thrown on the international market, contributes to the decline in the price of peanuts and thereby to a reduction in the already low standard of living of peanut producers. …

We rejoice that the International Monetary Fund is studying the balance of payments problem of raw material producing countries. The studies which it has devoted to compensatory financing of export fluctuations call for two comments on our part. First, it has been suggested that a special compensatory fund, closely linked to the international financial institutions but distinct from them, be established. This idea has, incidentally, been discarded by the International Monetary Fund. We can only concur with the Fund’s position on this matter.

The effectiveness of financial aid presupposes a unification of views and a concentration of resources. Dispersal and specialization of the work among a number of organizations would create the risk of frustrating these imperatives, regardless of the ties between the agencies. However, a special fund might be useful if it were designed not only to make foreign exchange resources available to member countries, but also to defend and raise the standard of living of producers.

We have also noted that the International Monetary Fund, unfortunately, does not favor any formula for automatic compensation of balance of payments deficits. This view is consistent with the Fund’s traditionally pragmatic policy. It seems to rest, however, on the assumption that fluctuations in the value of exports are of a temporary nature. The Fund’s aid under these conditions is linked to the idea of short-term compensation. If a policy of foreign exchange aid is to be viable, it must be based on a complementary economic policy of price support. International financial cooperation should therefore be approached from the most general and the highest angle, and must necessarily form part of an over-all action on economic structures.

Would it not be possible that, when surplus foods or other commodities are made available to certain countries, they should be chosen in such a way as not to upset, but even to promote, the sale of the principal products of underdeveloped countries? Could not a broad policy of redistribution at the world level be imagined? Could the “Food for Peace” program not only benefit the inhabitants of the countries receiving the food, but also, to a certain extent, the producers in the underdeveloped countries from whom the food might have been purchased?

Finally, I should like to urge that the French language be adopted as an official working language, along with English. This measure would justly take into account the now large number of French-speaking member countries and the fact that they are mostly underdeveloped countries where multilingual officials are unavailable; the best help your organizations could give them is indeed this technical assistance in making documents available to them easily understandable and therefore usable. …

October 2 and October 3, 1963.

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