Concluding Remarks1. By the Chairman of the Executive Board and Managing Director of the International Monetary Fund

International Monetary Fund. Secretary's Department
Published Date:
November 1961
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Per Jacobsson

I think I am right in saying that a larger number of Governors spoke on Wednesday during the Fund meeting than in any previous Annual Meeting. In the course of their speeches, many Governors described the situations in their own countries and the problems which they are facing. There were also many observations about the work done by the Fund, and suggestions for the future; and, in particular, many Governors referred to the question of the adequacy of the Fund’s resources.

It is evident that much thought has been given to the preparation of the various statements which we have heard, and I should have liked to be able to comment in detail on them all. I am sure you will agree, however, that it would be impossible for me to do so today, but I can assure you that very careful attention will be given in the Fund to what has been said here at this meeting.

All I can do today is to refer more specifically to one or two of the more general points that have been discussed.

A number of Governors referred—as I had done in my opening remarks—to the difficulties of the raw material producing countries resulting from the weakness and fluctuations in the prices of their export products.

The Governor for Malaya requested that the Fund’s staff should study this whole complex of questions, and I would like to assure him and the other speakers who referred to this matter that these questions have been considered, and will continue to be considered, most carefully in the Fund. Indeed, as you know, members of the staff took part in the discussions held by the group of experts appointed by the Secretary-General of the United Nations to study international compensation for fluctuations in commodity trade.

Many Governors also referred to the difficulties encountered by developing countries in their efforts to export to the industrialized countries. This is a matter which is causing concern in many quarters of the world, and I am certain that the representatives of the industrialized countries have carefully noted what has been said. Aid without the opportunity for trade will be of little long-term benefit to the developing countries, and will therefore not fulfill the objectives of those who grant the aid. While the benefits of a multilateral payments system are recognized and accepted, we must give due weight to the fact that trade liberalization has not progressed sufficiently, and certainly not in fields which are of importance for the achievement of a better balance between the richer and the poorer countries. There are still restrictions and discrimination in the field of trade and shipping, and the Fund will continue to be interested in these matters. As several Governors have stressed, one of the purposes of the Fund is to facilitate the expansion and balanced growth of international trade. The Fund will make every effort to pursue this objective within the scope of its functions. In this, and other matters, the Fund welcomes continued cooperation with other international and regional organizations.

From the discussions at this meeting, I think it is clear that there is complete agreement that monetary stability is the only safe foundation for sustained economic growth. That this has become so widely accepted is vital to the Fund in its work, for a stabilization program can never be truly effective unless all those involved in its implementation are convinced of its necessity.

The Governor who spoke first at our meeting on Wednesday—the Governor for Austria—laid great stress on the need for monetary discipline which had had such beneficial effects in his, as well as in other, countries. Many other Governors emphasized the same theme—and I conclude that there is world-wide agreement on this. As the Governor for the Netherlands so impressively pointed out, the monetary authorities have to tread a narrow path, particularly between inflation and deflation. This was a useful reminder and I fully agree with him that our problems are primarily problems of monetary management, for whatever dangers may be inherent in certain of our institutional arrangements, I think good policies can overcome them, especially if international resources, when needed, are used to gain the time for the proper execution of a domestic program of action.

I think that the consensus at this meeting has been that the present monetary system should be maintained because it has served the world well during the years since the end of the Second World War. I agree with the Governor for France, however, who said, “While recognizing that the world cannot, in the present state of affairs, fail to apply the system of the gold exchange standard, we must remain conscious of the risks of this system.” We believe that the system needs to be strengthened, mainly because the possibility of the transfer of funds from one country to another can cause difficulties against which a proper defense should be provided.

We have heard from the Governors of the two main reserve countries, the United Kingdom and the United States, that their Governments are determined to make all the efforts necessary to maintain a satisfactory balance of payments position and to preserve the value of their currencies. To enable the existing monetary system to work effectively, full confidence in the reserve currencies is indispensable, and we welcome these statements.

At the same time, an essential part in the present system is played by the International Monetary Fund, as a central agency lending strength to the currency structure. I think it has generally been agreed at this meeting that the Fund should be adequately equipped to help to deal with those problems that affect the stability of the system. And it is for this reason that we have been discussing the question of strengthening the Fund’s resources by borrowing currencies under Article VII of the Fund Agreement. Attention has been concentrated on making arrangements with the governments of the main industrial countries. This is, of course, a question of profound interest to all members of the Fund, for they all are vitally interested in measures designed to meet any major strains on the world’s monetary system.

I am glad to be able to say that all the Governors who touched on this subject expressed a positive interest in having the Fund make suitable borrowing arrangements to meet this contingency, and it is particularly heartening to find a broad measure of agreement among the countries that would be the expected lenders under such borrowing arrangements. As a result of this week’s meeting, I am confident that an arrangement can be worked out, large enough to be a powerful deterrent to any threat to the stability of our system. By its very existence, such an arrangement may indeed be expected to have a calming effect.

I mentioned in my opening statement that general safeguards for the lending members would have to be provided in any borrowing arrangement which would be established. Much attention has been devoted to this aspect in the discussion, and this is certainly a matter to which a great deal of attention must be given in the coming negotiations. Much work remains to be done, but my hope is that this work may be concluded by the Executive Directors before the end of this year. If that aim is achieved, there would be sufficient time for the member countries that will participate in this borrowing arrangement to seek early next year whatever authorizations are needed to give effect to the arrangement in their own countries.

In addition, several Governors, including those for Canada, France, Germany, the United Kingdom, and the United States, referred to the possibility of the Fund borrowing currencies from one or more of its member countries when, for other requirements of the Fund, the Fund’s holdings of those currencies might need to be replenished. Of course, if the Fund needed to replenish its holdings in this way it would agree with the lender on all the terms on which this would be done.

It has been my experience that during all the work on the development of Fund policies and activities, which has now been going on for many months, we have achieved a much better understanding of the working of our monetary system and the role that the Fund may play in it. In the same way, we have found the discussions at the present meeting very useful and illuminating, and I am sure that the work which remains to be done will increase the understanding of our common problems.

I would like to take this opportunity to say a word about my friend, Robert Garner. I first met him at the time he was doing so much to help organize the World Bank, and of course I have seen more of him since I came to Washington, while he was setting up the International Finance Corporation (IFC) and guiding it through its first formative and difficult years. He is a man who knows his own mind and has always been refreshingly outspoken. While we shall no longer have the opportunity of hearing his address to the Governors of the IFC, I trust and hope that we shall continue to hear a great deal from him in other capacities.

You are all aware from the Annual Report of the Executive Directors and from what has been said at the meeting that this has been a year of unprecedented work and activity for the Fund. I am grateful indeed for the kind remarks you have addressed to me personally, but I would like to remind you that the increased pressure of work has devolved very largely on the Deputy Managing Director, Mr. Cochran, and on the whole staff of the Fund, and I think great thanks are due to Mr. Cochran and the staff for the work they have performed and the untiring devotion they have shown to the true interests of the Fund and the member countries. I would also like to thank the Executive Directors for all their work and help, not only during the formal discussions in the Board, but also in the day-to-day efforts which must precede any formal Board decisions.

Before leaving this city, I should also like to join those who have thanked our Austrian hosts for all the courtesies and hospitality they have extended to us during this strenuous week, and we must also thank the International Atomic Energy Agency, as well as the Austrian Government, for the help they have given us in arranging this meeting.

I would like to end these remarks by commenting on what I believe to be one of the most favorable aspects of the world financial position today. I refer to the growing sense of mutual cooperation and community of interest in financial matters between the nations of the free world. The Fund has played, and will endeavor to play, a useful role in fostering this sense of interdependence among the nations, both through meetings such as this, and in the regular consultations with member countries and discussions in the Executive Board.

Delivered at the Closing Joint Session, September 22, 1961.

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