Chapter

Statements Bearing on Fund Policy, Delivered at Sessions Other than the Discussion of the Fund’s Annual Report1

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1962
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Statement by the Governor for Togo2Hospice D. Coco

It is with much pride and great satisfaction that my delegation participates for the first time in the discussions of this meeting as a member of the four great international financial organizations.

Togo, through its past, and through its position as a former territory under the trusteeship of the United Nations, has a special calling for international affairs. It is therefore in a spirit of complete solidarity that our people and their Government intend to join your organizations.

Although we are proud to have struggled for and obtained political independence, our people are fully aware that this essential stride is only one step taken in the heavy and difficult task of turning their small country into a modern developed country in an already heavily industrialized world where the structure of production is becoming more and more gigantic. That is why we expect a great deal of the International Bank, the International Development Association, the International Finance Corporation, and the International Monetary Fund.

But far from our minds is the idea that the various forms of aid that we may obtain through these international organizations and from bilateral sources should be a substitute for our own efforts in the conduct of the immense tasks that lie before our young nation. Had that been the case, our independence would have had no meaning. We realize that in a world strongly dominated by technology and the structure of the relations existing between developed and underdeveloped countries, our efforts would be futile if they were not supported by external assistance.…;

But, beyond those tangible and important services [expected from the IBRD, IDA, IFC, and IMF], we hope that these great world organizations will help us to solve the economic and financial problems that arise in a world that is more and more interdependent.

In the first rank of these problems we would place the one that arises from the deterioration of the terms of trade in primary products. It is indeed futile to request our rural people to make an effort and to make additional sacrifices if they are immediately crushed by the fall in the prices of their products. While agreements like the one on coffee, to which we are a party, may be a temporary alleviation, the only lasting solutions will be long-term ones that will enable the underdeveloped countries to have a favorable share in the growth of world production in harmony with the growth of world demand. We wish to express our firm hope that in these international organizations such solutions may be conceived, matured, and carried out.

We also hope that the Bank and the Fund will be able to contribute ever more effectively to the development of international credit and to the application of a fiscal policy, on a world-wide scale, that will facilitate the emergence of the nations still economically weak. Togo, for its part, will always be happy to contribute to the development of solidarity and cooperation on a world-wide scale. While our country pursues a policy of increasingly close economic cooperation with its regional neighbors, this is not to the detriment of a policy of African unity, but is done in the hope that this regional group will strengthen and develop the region’s economic relations with the whole of Africa and thus contribute tangibly to the achievement of African economic unity.

Moreover, we conceive of our association with the European Economic Community and of our membership in the Franc Zone as a reciprocal cooperation that will permit rapid growth of trade between partners and serve as a support for the development of our trade with the rest of the world.

We express the hope that our brother countries which are not yet members of these great organizations will be in a position to join us before the next meeting.…;

Statement by the Governor for Ghana3F. K. D. Goka

Mr. Per Jacobsson, in his statement to this meeting yesterday, spoke at some length on the question of replenishing of Fund resources by borrowing. The negotiations which were conducted after the Annual Meeting in Vienna last year have led to arrangements by which the Fund would be entitled to borrow $6 billion under Article VII of the Fund Agreement. We, in principle, welcome these arrangements, although they are not especially designed to meet the needs of primary producing countries. We nonetheless welcome them because we feel it is in our general interest to devise ways and means of forestalling any impairment of the world’s payments mechanism. It is the hope of my delegation that, in administering these arrangements, great care will be taken by the participants, who are the main industrialized countries, to ensure that the authority of the Fund as an international institution is in no way weakened.

It can be said that the past year has been characterized by two major global economic problems. The first was the threat to the international payments system which resulted from pressure on the two key reserve currencies. The other was the continued decline in primary commodity prices. Now that we have been assured by Mr. Jacobsson that the first problem is on the way to solution, I would like to suggest that the next assignment should be an attack on the general problem of price stabilization for primary products. It is becoming increasingly clear that the threat to the stability of the world’s economy and payments system, and indeed to world peace, coming from falling commodity prices, is as great as that caused by continued pressures on the two key reserve currencies—the dollar and the pound sterling.

In Ghana, we have had very difficult experiences in the last three years arising primarily out of this downward trend in commodity prices. The average price of cocoa, which was £G 352 per ton in 1958, fell to £G 177 per ton in 1961. In fact, during this 196⅙2 cocoa season, the world price of cocoa fell to its lowest level of the postwar period. I have no need to tell you what has happened meanwhile to the prices of our imports or the size of our population in these seventeen years since the war. As a result, our trade balance deteriorated from a surplus of nearly £G 20 million in 1958 to a deficit of some £G 28 million last year. Far-reaching adjustments have had to be made to meet this situation and, as a result, in the first half of 1962 our trade balance moved into surplus. These adjustments have exerted, collectively, a deflationary pressure on the economy as a whole. With a growing and increasingly better-educated labor force, there are obvious limits to the extent of deflation that is consistent with social stability. Although we have had generous accommodation from the Fund in meeting a part of this problem, the basic difficulty remains unresolved. In the United Nations and other forums, Ghana has taken part in discussions with a view to working out a stabilization scheme for cocoa. These discussions have not yet yielded any results. The imbalance between supply and demand on the cocoa market continues. It is difficult to envisage what other recourse would be open to us if, in the near future, agreements are not reached on a stabilization scheme for cocoa, or appropriate and comprehensive arrangements for compensatory financing are not devised. My delegation is of the opinion that only some such scheme will enable us to absorb the losses in foreign exchange receipts arising from the decline in world cocoa prices.

Under present arrangements, such as our drawing rights in the Fund, the volume of accommodation available to a country like ours is relatively small compared to the not unusual short-term fluctuations in balance of payments due to a fall in cocoa prices. Moreover, the existing arrangements are essentially designed to meet temporary payments difficulties. But the problem of falling cocoa prices, indeed of declining prices for primary products in general, is not a temporary one. As I have said, the deterioration in the cocoa market has now lasted four years and seems likely to continue for some time.

During the last year, like other developing countries, Ghana has had to resort to short- and medium-term borrowing on an extensive scale. As the Chairman remarked yesterday, there is a limit to this process. It is against this background that my Government would support any satisfactory proposals that would be advanced for a substantial increase in the resources of the IDA. We feel that it is only when long-term loans at low rates of interest are available on a considerably larger scale, that underdeveloped countries can hope to diversify their economies to the point of providing adequate standards of living for their growing populations.

Whilst long-term loans at low interest rates or even outright grants are necessary and welcome, it is essential also that the developing countries continue to have access on a nondiscriminatory basis to the markets of the industrialized countries. It follows, therefore, that my Government views with great misgivings any regional economic groupings which tend to introduce new elements of a discriminatory character into the established patterns of world trade.

Ghana, along with all primary commodity producing countries, is under great pressure to find new markets for its products. It is regrettable, but nonetheless a political fact of our times, that a large group of countries who seem to offer a potential market for primary products are not members of our organizations. Trade with them therefore necessitates special arrangements. Experience has shown that some form of trade and payments agreements with these centrally planned and state-trading countries is indispensable in any efforts to increase our trade with them. It is my hope that the peculiar problems posed by trade with these countries will at some stage be studied dispassionately and sympathetically by our organizations. In fact, it would seem that the time has come when a generally accepted set of principles should be devised to govern the trading relationships between countries with different economic systems.

Permit me to touch on a related matter which my delegation thinks has an important bearing on the present economic imbalance facing primary producers. This is the issue of world peace and disarmament. We feel that without a serious and sincere desire on the part of the present two world power blocs to live and let live, to encourage world trade between the two economic systems, and to divert a portion of the scarce resources now devoted to war preparation, the gap between the underindustrialized and industrialized nations, instead of closing, will widen still further.

The Government of Ghana intends to introduce early in 1963 a new seven-year plan for the development of the country, aimed at diversifying its economic structure. In this connection, we have undertaken a complete review of our trading and financial arrangements. It is obvious that Ghana will require considerable capital assistance from abroad to implement this program. In the difficult period of adjustment during the last four years, we have had to take measures to safeguard our financial position which have not always been understood by our friends and critics. Some of the latter have sometimes seemed to us persistently unfair. However, we are also learning from our experiences and from the reactions of our trading and financial partners to them.

The Government of Ghana fully intends to take cognizance of the friendly advice that it has received in the process of reformulating its financial and economic policies. We are hopeful that the response of the world community to these new undertakings and policies will be generous and forthcoming.

Statement by the Governor for the Federation of Malaya4Tan Siew Sin

It is customary on an occasion of this nature for a country delegation to give a brief account of its position and problems in the financial and economic fields. The Federation of Malaya, like other member countries of the Bank and Fund, has its own story to tell, but I believe that a common thread runs through the experiences of developing countries like ourselves which are largely producers of primary commodities, and quite often we have to rely heavily on only one or two of such commodities for the bulk of our export earnings.

It is, of course, true that those of us who are in this category may have our particular or special problems. Most of us require more development aid; many are faced with the perennial problem of balance of payments difficulties; others may have to surmount the barrier of an overpopulated country striving to increase a standard of living which is low even by the standards of developing countries; some suffer from all three disabilities; but one central problem overshadows all others insofar as we are concerned.

I refer to the problem of the growing disparity in the terms of trade between the highly industrialized countries on the one hand and the developing countries on the other, arising from the fact that the prices of primary products have not, by and large, in the postwar years, kept pace with the increase in the prices of manufactured goods. As such manufactured goods form the bulk of imports of the developing countries and as such goods also come mainly from the industrialized countries, this means that the value of primary commodities is decreasing in relation to that of manufactured goods in terms of purchasing power. This ever-widening gap between the value of exports and imports of the developing countries can only be closed by producing a greater volume of export commodities for the same volume of imports or by a number of measures taken in concert.

Of one thing, however, we are certain, and that is that this problem cannot be solved by increasing either the tempo or the volume of development aid, however generous. This is only a palliative which does not go to the root of the problem. In this connection, I would like to say that we welcome the announcement contained in your opening address, Mr. Chairman, that the Governors of the International Development Association have before them proposals for a possible increase in the resources of IDA. This is certainly a move in the right direction. Coming back to the main problem, it is submitted that its crux lies in ensuring that the prices of primary commodities are firstly stable, i.e., not subject to wide fluctuations in price over the short term, and secondly, they are fair in relation to those of manufactured goods. To be fair to the industrialized countries, which, in effect, means the countries of the Western world, there is a growing awareness that this is an important problem, but it appears that there is still no sense of urgency in coming to grips with a problem which could have formidable and world-wide repercussions if it were allowed to get out of hand. Time is certainly not on our side.

One solution for the developing countries is for those who are substantial producers of the same commodity to come together and market their product through one central selling organization in order to secure a fair and stable price for it. It might also be borne in mind that stable prices are in the interests of consumers as well as producers, for in such case the former can plan their manufacturing operations with greater precision in the field of costings.

There is, I believe, at the moment, a tentative proposal which is being examined by a United Nations committee which has as one of its aims the provision of what has been termed compensatory financing for countries which are in temporary balance of payments difficulties as a result of a sharp fall in commodity prices. If I may say so, the basic defect of such a device is that such compensatory financing might be used to cover only a current account deficit. Its use under such circumstances, particularly in a nonproductive field like social services or defense, would actually worsen the position of the country concerned in the long term when the time comes for repayment, as good debtors eventually repay their debts.

A more promising solution might be the creation of an international stockpile for each commodity. It is, of course, agreed that each commodity will have to be studied on its own merits and plans made accordingly, but the general principle would be the same. We are also aware of the usual arguments which have been advanced against such a scheme, namely, that they tend to freeze world patterns of trade permanently and thus lead to permanent distortions of trade. Another argument which has been advanced against this broad conception is that if floor prices tend to be too high, and hence unrealistic, they will only postpone but not eliminate the final day of reckoning for producers living in a fool’s paradise of a sheltered market. It is submitted that if the scheme is made sufficiently flexible and realistic, particularly in relation to matters like the floor price, there is no reason why it should not be both workable and enduring. In passing, it is for consideration whether the United States, for example, might do worse than to turn over that portion of its strategic stockpile regarded as surplus to its foreseeable strategic requirements to some international agency like the International Monetary Fund. In return, the Fund could issue that country bonds backed by gold.

Another solution, and this is one which is being increasingly resorted to by developing countries, is to industrialize as rapidly as possible. Here again, we encounter a serious obstacle if we become really successful. It is clear that if we are to industrialize successfully we must be able to export the products of our manufacturing industries to the industrialized countries, which, at the moment, are the only ones capable of absorbing them in any significant quantity, owing to their much greater purchasing power. However, the moment that inroads are made into the economies of such countries, that is, the moment a point is reached where imports of manufactured goods into the countries of the Western world are likely to diminish the production of the same goods produced by their home industries, trade barriers are put up or gentler methods of coercion, euphemistically termed “voluntary” limitation of exports, are used. It should not be too much to ask the industrial countries to consider allowing easy entry for manufactured goods from the developing countries.

The net result may be that the developing countries come up against a blank wall whichever way they turn. Under such circumstances, they would forever be in a position of suppliants for aid and charity. This could be most unfortunate, as in their desperation they might turn to drastic remedies and, in the process, bedevil relations between the countries of Asia and Africa on the one hand and those of the Western world on the other.

It might be thought that this alarming tendency, which I have tried to sketch as likely to ensue if the existing pattern of world trade is allowed to go on unchecked, is exaggerated. Let me quote my own country as an example. Our country of about 50,000 square miles, of which three quarters is still under virgin jungle, peopled by seven million inhabitants, is regarded as an oasis of peace, stability, and prosperity not only in Southeast Asia but in Asia itself. According to figures issued by the IMF for May 1962, our foreign assets amount to US$953 million, equivalent to US$136 per capita, although we depend largely on rubber and tin, which account for something like 80 per cent of our total export income on an average, and although the prices of both commodities are liable to the most violent fluctuations within an incredibly short space of time. Balance of payments difficulties are practically unknown to us up to now. Our per capita gross national product at current market prices of US$261 per annum is the second highest in Asia. As a result, we enjoy one of the highest living standards in that part of the world. In spite of these considerable advantages—and compared to many other developing countries we are in an enviable position—the prospects, even for us, are not as cheerful as they might appear on paper.

Natural rubber, which accounts for about 60 per cent of our total export income, is confronted by synthetic rubber, the consumption of which is increasing in the Western world while that of natural rubber is steadily decreasing. Our only hope is that the over-all increase in world consumption would make up for the heavy inroads made by synthetic at the expense of natural. There is also the factor of consumption in the Communist countries, which hitherto has made up for the decreasing consumption by the Western countries.

Tin is in a slightly happier position because there is no synthetic tin and there are no economic substitutes in sight, and neither can you increase the world supply by the simple expedient of new planting or replanting tin as you do rubber. Even here, however, the American strategic stockpile of tin equivalent to something like two and a half years’ consumption for the whole world hangs over us like the sword of Damocles. Like other developing countries, we are trying to industrialize, but here again we have in at least one instance come up against the barrier of export limitation, about which I have already spoken. Like all countries ruled by the parliamentary system of democracy, based on free elections and universal franchise, the government of the day has to show by results that it can increase living standards, if it is to survive.

Three factors are, however, causing us serious concern. In the first place, the price of our main export commodity, rubber, is falling steadily for a variety of reasons which I need not go into here, and the long-term indications are that prices will steadily decrease from now on with the result that the level we are likely to obtain by the end of the decade may be only slightly more than half the average level obtaining at the beginning of this decade. Secondly, in spite of this factor, we are trying to accelerate our rate of economic development in order to at least maintain, if not enhance, living standards. Thirdly, the Federation of Malaya should in less than a year’s time cease to exist and be replaced by the Federation of Malaysia, which will comprise, in addition to Malaya, Singapore and the three Borneo territories of Sarawak, Brunei, and North Borneo, which are at present British dependencies.

Malaysia will mean the creation of a new state of 130,000 square miles and ten million inhabitants. Its long-term potential is reasonably good, as the Borneo territories are even emptier than Malaya and have reasonable agricultural and mineral resources. For the short term, however, the new state will have to undertake additional and unavoidable commitments in the matter of defense, and it would be politically hazardous to impose additional levels of taxation on the new members of the family in order to bring them up to Malayan ones; having in mind that it is human to want something for nothing, the Borneo territories already expect greater economic development as a result of federation without having to pay for it.

The effect of the three factors referred to already, and taken together, has started a drain on our resources—a process which will be continued and indeed accelerated in the coming years, until by 1965 we will be scraping the bottom of the barrel, so to speak. If this is the plight of Malaya, and subsequently the prospect for Malaysia, which has been described by one Washington newspaper as likely to become one of the most viable federations of our time, it can be imagined what is the position of other developing countries which are not so fortunately situated.

I have spoken on this subject in order to suggest that a fresh approach is required. If my words can provoke new thinking on an admittedly vast and complex subject, I would suggest that a hopeful start has perhaps been made.…;

Statement by the Governor of the Bank for the United Arab Republic5A.M. El Kaissouni

It is with great interest and appreciation that we have read the Annual Reports of the IBRD and its affiliates (the IDA and the IFC) and listened to the enlightening speech of Mr. Black. We have noted with satisfaction that the total loans of these three institutions have set a new record and that these institutions are deeply concerned not only with financial problems but also with the technical and economic problems of planning and of implementation. We hope that this recent record will soon be dwarfed by the continued progress of these institutions and trust that their technical assistance to member countries will be widened and intensified.

We would also like to extend a warm welcome to all the new members who have joined our great institutions, and who will broaden their bases and contribute to their greater effectiveness in the field of international economic cooperation. In the Arab sphere, we would like particularly to welcome Kuwait, who has recently acceded to its independence and has rightly taken its place in the community of nations as an equal and honored partner.

The present year has witnessed remarkable international consciousness of the growing pains of development in the less developed areas of the world. As a matter of fact, it is not an exaggeration to state that 1962 is the year of recognition for the problems of development. Consciousness and recognition have been intensive and widespread after being sporadic and scattered. Efforts to understand—and search for solutions of—development problems were carried out by UN agencies and committees, by interested groups and institutions, by individual countries on both sides of development, and, probably for the first time, by the less developed countries themselves as a concerted group, when they decided to convene in Cairo last July for the Conference on Problems of Economic Development.

Of all the results which were conceived from these activities on the various levels on which they were carried, the most outstanding is the crystallization of development problems and the alternative means to cope with them. If this achievement has prepared the ground for coordinated and systematic action to cope with development on a realistic and practical basis, then the effort is rewarded.

The developing countries have realized with deep concern a growing anxiety that their relative position in the international economic sphere is getting worse as the years go by. Internally, they are facing serious problems of population growth, financing, and technical education, while externally they face even more serious problems of deterioration in the terms of trade, economic blocs, and greater difficulties of access to the large foreign markets. These facts are not only recognized in the less developed countries, but the studies made by the international organizations on these subjects and by many advanced countries come to the same conclusions.

The Annual Report of the Fund this year deals at great length with these problems; and you, Mr. Chairman, have put the matter quite clearly by saying, “With prices of primary commodities persistently weak, the inflow of development capital little more than offsets the weak trend of export earnings,” and by saying, “The less developed countries have had an increasingly smaller share of world trade. The trade gap between the industrial countries and the nonindustrial countries is constantly widening.”

Mr. Black, in his valuable address, speaks also of the adverse factors in the international trade of the developing countries that hinder their development. One difficulty, he says, is created by the trade policies of the industrialized countries. Another—a more serious one—arises from the unfavorable movement in the terms of trade of most of the less developed countries. Then, with typical accuracy, he illustrates the effects of such deterioration in the terms of trade by saying, “In one European country, whose experience is reasonably typical, this swing was sufficient to make the nation’s total import bill in 1961 about 8 per cent less than it would have been had 1956 prices still prevailed.”

Mr. Jacobsson states that it is “the responsibility of the industrial countries to pursue liberal trade policies, opening their markets to imports from less developed areas.”

I could go on quoting from scientific studies and eminent speakers indefinitely, but it is sufficient to note that the pleas, the facts, and the data which we in the developing countries have on so many previous occasions presented in these meetings of the Bank and Fund, or in other meetings of the United Nations and its specialized agencies, have had at last such a unanimous and heartwarming response.

One of our friends in the Cairo Conference once said, “We, in the underdeveloped countries, have to run hard in order to stand still.” It would seem to me, however, from a closer scrutiny of the facts and the figures just referred to, that although we are running hard we are, unfortunately, being driven backward.

Confronted with all these facts and figures and this almost unanimous recognition of the difficulties which face the developing countries, and which are partly due to their own actions and partly due to the actions of the industrialized countries, it is necessary for us to reiterate the urgent need for effective solutions and real remedies. It is also necessary to emphasize that whatever remedies and solutions we may advocate, their effectiveness will only be in their implementation. I am told that the amount of studies and memoranda which have been written by the United Nations and its specialized agencies on problems of development would fill several buildings the size of this one. However, if we may recapitulate the major remedies for the problems of underdevelopment, we would mention:

First: That the major task and basic duty lie with the less developed countries themselves. It is for them to see that their finances are in order, that they have a proper and comprehensive program of development compatible with their resources, that they have adequate technical education, efficient managerial administration, and proper exchange rate structure.

Second: However, as these countries develop their resources and increase their ability to export, they find it most disheartening that the industrialized countries, which have supplied them with the machinery required to help them to industrialize themselves, are adopting toward their goods a discriminatory policy and are closing the door in front of these goods while leaving it wide open to the exchange of goods of other industrialized countries. Therefore, a much more liberal trade policy should be adopted by the industrialized countries toward the new and growing exports of the developing countries.

Third: As the terms of trade are constantly shifting against the primary producing countries, it is necessary to stabilize their prices at a relatively remunerative level compared with the prices of the industrial commodities that they import. There are many schemes which have been elaborated by great experts in this connection, and it is necessary to adopt some of these schemes on a large and adequate basis.

Fourth: The volume of development finance and development aid given to the developing countries should be greatly increased to cope with their pressing needs. We have noted with satisfaction that our institutions have set records of financing in the last year. But we do hope that in the coming years we will see a greater volume of financing. We especially hope that the funds available to IDA will be greatly expanded, so that the ability of our institutions to advance loans on easy terms to the developing countries will be greatly increased.

Fifth: We would also like to see the proportion of loans granted for industrial development greatly increased. One of the major difficulties of the developing countries is that they export primary products, prices of which are constantly falling, while they import industrialized goods, whose prices are constantly rising, and it is necessary in order to alleviate the effect of this deterioration in their terms of international trade to enable them to manufacture some of the industrial goods which they import and even to expand their ability to export such goods.

These are some of the recommendations that we consider necessary for the solution of some of the problems of economic development.

I feel confident that through our common endeavor and sincere cooperation we will achieve many of them. A great deal has already been done, but much more remains to be done.…;

Statement by the Governor for Senegal6Andre Peytavin

Senegal has but recently achieved political independence. It has had, within a short space of time, to bring into being the administrative machinery and economic organization of a nation responsible for its own affairs and true destiny. This process has proceeded smoothly; it has not given rise to financial difficulties; the budgets have been balanced and have shown surpluses that have served to increase the investments of previous years.

Membership of the IMF, IBRD, and its affiliates became at a very early stage one of the objectives of our financial policy. For a country of modest size, at grips with the problems of economic growth, membership of these four institutions involves a heavy financial sacrifice, but we regard it as our duty to associate our country with international cooperation in the monetary and financial spheres. Generally speaking, the States of Africa have a very keen awareness of the vital need for the solidarity of the human race and for the obligations this imposes. They are therefore specially anxious to show their profound interest in all forms of world cooperation and to take an active part in the work of the great international organizations.

Senegal’s membership of the IMF should be assessed in terms of the original status of our currency. Quite recently, the Ivory Coast, Dahomey, Upper Volta, Mauritania, Niger, and Senegal decided, by the Treaty of May 12, 1962, to continue their Currency Union with a single issuing institution. Our young States considered that a common currency with a large and assured area of circulation and based on a plurality of economies would represent one of the best ways of securing rapid and harmonious development. We were, therefore, particularly appreciative of the words of approval and encouragement of this kind of Currency Union mentioned by Mr. Jacobsson on Monday. We see in them a promise of success. In entrusting the management of their currency to a Joint Central Bank, which is to be established on November 1 next, our States have agreed to forego part of their currency sovereignty in the interests of the Union. It is a mark of their adherence to a kind of code of good conduct in monetary affairs and a guarantee that the creation of money will not be left uncontrolled to respond solely to the often dangerous and anarchic stimulation of immediate pressures. Nevertheless, each State will maintain the right to a large measure of control in matters affecting the creation of money in its territory to meet its own needs, the grant of credits for currency issues being, in the case of each State, entrusted to a National Monetary Committee making decisions within the framework of general powers delegated to it by the Board of Directors of the Joint Central Bank. Furthermore, under a cooperative agreement binding together all the member republics of the Currency Union and France, the franc of the African Finance Community, i.e., the CFA franc, will continue to be freely exchangeable with the French franc at the existing parity and without any limitations. This free convertibility gives the CFA franc the support of a world currency.

Although a trade balance has only recently been established in Senegal, it is possible to record an improvement in the sector of external payments. This coverage of imports by exports, which represented 63 per cent in 1960, rose to 80 per cent in 1961.

The balance of payments, to the extent that it has been so far possible to supply separate figures for each of the countries of our Currency Union, shows that the position in Senegal is, on the whole, satisfactory. The equilibrium achieved is, moreover, largely due to the bilateral aid received. This balance of payments cannot, however, at the present stage, be regarded as more than an indicator, the common currency having precluded an exact analysis of all the factors at play. For the future, all the necessary technical steps have been taken to enable each of the six countries to draw up its own balance and follow its own variations. In any event, the future development of the external payments position of Senegal can be anticipated without pessimism. On the other hand, our country is facing very serious development problems.

Although the structure of the Senegalese economy undoubtedly presents considerable variety, it remains insufficiently diversified. Our country possesses a sizable industrial sector with promising prospects of expansion, but the majority of its people remain rural in character and continue to devote themselves too exclusively to the single crop cultivation of the peanut. To guarantee the peanut farmer a profitable selling price, the Government has established the Agricultural Marketing Office, which acts as a kind of marketing board. Nevertheless, the standard of living of the Senegalese farmer remains very poor. National revenues are of the order of CFAF 135 billion for a population of more than three million inhabitants, representing an average annual per capita income of less than CFAF 45,000, or US$180. In the social sector, attendance at schools remains below 30 per cent, and sanitary services are inadequate.

We have mobilized the nation and, despite its limited resources, the Government of President Mamadou Dia, since it assumed responsibility in 1957 for the financial affairs of the State, has succeeded, without foreign subsidies, in balancing the national budget, which includes, besides all the operating costs of the public sector, large and constantly increasing expenditure on capital equipment. Thus the percentage of appropriations devoted to investment in relation to the net level of the budget has increased progressively from 9 per cent in 1957 to more than 22 per cent in 1962. Such results have only been achieved through sacrifices made by all of our people, by strict management of public finances, and by bringing into being a feeling for the “mystique du plan.”

After two years of continuous work under the guidance of international experts collaborating with representatives of the public and private sectors, the National Assembly has approved the First Four Year Plan covering the 1961–64 period. This voluminous document is a detailed account of the present situation and of the prospects in each sector. It sets, while avoiding over-optimism, a certain number of targets based on both the facts and the practical possibilities; it assumes a gross annual growth rate of 8 per cent for internal production and one of 6.3 per cent for private consumption corresponding, after making due allowance for demographic pressures, to a growth rate in the standard of living of 3.5 per cent. Another objective of the Plan is to increase the average rate of investment from 10 per cent in 1960 to 15 per cent in 1964. The realization of the Plan will involve an over-all volume of investment estimated at CFAF 100 billion, i.e., an average annual volume of investment of CFAF 25 billion, corresponding to US$100 million. Twenty per cent of these investments will be in the infrastructure, 13 per cent in the rural economy, 44 per cent in industry and trade, and 23 per cent in projects of a sound character.

This program, though relatively modest, represents a significant effort in relation to the country’s financial resources. To carry it out, it will be necessary to have recourse to all possible sources of financing. In the forefront of these is private capital, and it is therefore expected that 45 per cent of the funds devoted to the Plan will be obtained from the private sector. Here I would like to stress the close collaboration that exists in Senegal between the public authorities on the one hand and manufacturers and businessmen on the other. African socialism, as we understand it, does not exclude private enterprise but, on the contrary, reserves a very large sector for it, especially in the industrial field. Moreover, our Government has continued to take numerous measures, particularly in respect of taxation and customs, for the purpose of encouraging the investment of private capital. The Investment Code, recently promulgated, adds still further to the advantage offered and makes guarantees with respect to the movements of capital and savings.

However important it may be, financing from private sources will be insufficient to meet the needs of our Plan. A large share of public funds will undoubtedly continue to be devoted to it, and we are placing great stock in the contribution to investment in terms of human resources but, at the same time, we have called upon, and we shall again have to call upon, bilateral and multilateral aid.…;

Statement by the Governor for Nepal7Lakshmi Nath Gautam

It gives me great pleasure to have the opportunity of attending this meeting, the second meeting of these organizations attended by Nepal. I must begin by congratulating the management of the Fund on the effective efforts which they have been making during the past year to stabilize international payments. Some of our fellow members must sometimes wonder, as I do, whether the speculative movements of short-term capital, with their disequilibrating effects on balance of payments positions, do not inhibit the highly industrialized countries from making available more capital for export. When reserves have to be used to counter speculative movements of short-term funds and when restrictive steps have to be taken to correct balance of payments positions, it is possible to appreciate the apprehensions which even the highly industrialized countries may entertain at some time about the export of long-term capital for which the less industrialized countries are clamoring so greatly. In this context, it is heartening to note that positive steps have been taken during the year under review to ensure that nations will take swift cooperative action to prevent short-term capital movements from intensifying basic deficit positions.

It is also encouraging to note the leading part played by the Fund in analyzing these movements and suggesting remedial measures. I personally believe that, if these flights of short-term capital, which by their movements generate the very situation from which they seek to escape, can be brought under control, there will be created an environment in which the more highly industrialized nations will be prompted to increase their lending facilities, the use of which is so urgently required by all developing nations. The Report of the Fund’s activities also seems to suggest that, provided the speculative element in world finance can be cured, there will follow greater hope of stability in world trade. Certain pressing problems of some of the developing countries are connected with trade patterns and difficulties of obtaining convertible currency for goods and services exported. We, however, hope that proper appraisal of such national problems on an international basis by the IMF will help us solve them.

It is also encouraging to read in the latest Report that the Fund, which was conceived to tackle the problem of liquidity and exchange stability, has been able to go ahead quite smoothly, and we are confident that the progress will be accelerated in the future.

Statement by the Governor of the Bank for Colombia8Carlos Sanz de Santamaría

It has been the custom for the group of Governors from the Latin American countries to meet during the Annual Meetings of the Fund and Bank to talk about common problems and analyze the effects of the action of these great international institutions on the development of their countries and on the process of their economic activity. This year, as in the preceding years, this group has met It did me the honor of appointing me its Chairman, and that is why I am speaking before you here in the name of the Latin American delegation.…;

In the brief statement I wish to make here, I should like to point out that Mr. Jacobsson’s excellent speech stimulates optimism, because it shows clear and precise progress in the international monetary system and in the relations of the countries which have through history created the greatest volume of international capital. The dollar, the mark, the franc, the pound, the guilder, and all the other convertible currencies have a strength and a balanced inter-relation which warrants the expectation of a stable, strong period in the monetary system within which our nations operate.

It is stimulating to note also, both in Mr. Jacobsson’s and in Mr. Black’s speech, that both are devoting special attention to the serious problem of the underdeveloped countries, which form the majority of mankind. The sole fact that the Fund and the Bank have the solution of the problems of these countries as the main point of study for their future action is very promising and guarantees that the measures adopted thus far—many of which have been very effective for promoting an increase in the standard of living of countries in an early stage of development—will be supplemented in the future by new systems and will be given additional means for accelerating the process of economic development.…;

The largest economic problem which our countries are facing today is the deterioration of the terms of trade. If 1953 is taken as the base of 100, the terms of trade indicate that from then on the countries of Western Europe which have made a recovery, the United States, and some countries of other areas have obtained great advantages. Their present index would range between 105 and 110, while the indexes of Latin America, taken as a whole, have undergone a considerable decrease, represented by the figure 83.

Although these figures show the Governors the seriousness of the process for the backward area of our continent, some objective examples taken from the case of Colombia give striking emphasis to this phenomenon, which is very similar to that observed in other countries of the region whose principal source of foreign exchange is coffee. In 1954 we had to pay 19 bags of coffee for an automobile. In 1962 it takes 32 bags to buy an automobile. In 1954 we bought a jeep with 14 bags. Today it costs 39. In 1954 we could buy a typewriter with one bag of coffee. Now we need one and a half. In 1954 we could buy a ton of newsprint with two bags of coffee. In 1962 we have to give three and a half. Finally, to buy a medium tractor in 1950 it was necessary to sell 131 bags of coffee. Today a tractor costs 295 bags, i.e., the price has increased 225 per cent.…;

The best cooperation that the developed countries can render to the countries which are still not in an advanced stage of industrialization is to promote higher earnings for the latter’s exports of raw materials, and even for the manufactures of their infant industries, and to supply—in addition to normal credits for specific projects—temporary aid for the purchase of intermediate goods—basically aid which no advocate of orthodoxy likes to hear of: “balance of payments credits.” However, these credits are essential during the period of implementation of economic development programs, while the infant economies now based on the export of one or several products are being transformed into diversified economies.

We call on the Governors of the European countries and those who represent other areas to conduct a campaign to open the doors of their trade to Latin American products in increasing volume; to transform the aid they are now giving countries with which they have had special political and economic relations into new forms which would eliminate discrimination; to modify internal taxes substantially and reduce customs tariffs for Latin American products. The elimination of all these obstacles to trade in our exports would be a good aid for the intensification of trade, for the economic development of our countries, and for contributing to full employment in the developed countries. If we have more foreign exchange because we sell more or at a better price, we shall be in a position to buy equipment and manufactured articles from them in larger volume.

Many important steps are being taken to improve trade relations between the various countries. There is a better understanding on the part of the advanced countries of the needs of the backward countries and of the right proportion of mutual obligations. But we are still far from the goals which we must reach. Economic instability entails social instability, and with it comes political instability.

Surely there are bases for arriving at stability and equilibrium in Latin America. In spite of having lost up to 50 per cent of its foreign exchange earnings from exports of raw materials in the period from 1954 to 1962, in spite of having felt the impact of the higher costs of its imports because of the price increase in industrialized countries, and in spite of the increase of 30 per cent in its population and hence in its needs, Latin America still has the vigorous momentum for planning its development and has lost neither its faith nor its will to progress.

If after our development programs are completed and the necessary effort has been made at home for the essential portion which our people must provide, we can count on appropriate and timely support from the more industrialized countries and international institutions, the countries of Latin America will have stable, advanced economies in a few years, and will become wide markets for the fully industrialized nations.

After having concluded these observations which I wrote yesterday, following the meeting of the Latin American group, the group had an opportunity to hear an extremely important statement by Mr. Jacobsson, who addressed himself to our Latin American group. There we were able to appreciate the tremendous progress made by the Fund with regard to the understanding study of our problems. He spoke of the interest of an indirect type which the Fund would have and the interest with which it would follow the study of consortia groups designed to help underdeveloped countries and of the compensatory funds to permit elimination of fluctuations of raw materials exports of our countries.

The interest of the Fund in these two vital aspects for underdeveloped countries stimulated our interest. I did not wish to let this occasion pass without expressing to Mr. Jacobsson and to the Fund our great gratitude for these new ideas and these new interests on our behalf and on behalf of the underdeveloped countries.

Annual Discussion of the IBRD, IFC, and IDA, September 18, 1962; Second Joint Session, September 20, 1962; and Closing Joint Session, September 21, 1962.

Delivered at the Annual Discussion of the IBRD, IFC, and IDA, September 18, 1962.

Delivered at the Annual Discussion of the IBRD, IFC, and IDA, September 18, 1962.

Delivered at the Annual Discussion of the IBRD, IFC, and IDA, September 18, 1962.

Delivered at the Second Joint Session, September 20, 1962.

Delivered at the Second Joint Session, September 20, 1962.

Delivered at the Second Joint Session, September 20, 1962.

Delivered at the Closing Joint Session, September 21, 1962.

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