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 1959
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Per Jacobsson

There have been two main topics which have dominated the discussion of the Fund’s work during this Annual Meeting. One of them has concerned the strengthening of the monetary position of the industrialized countries and the policies which should now be pursued as a direct consequence of this improvement. The other topic has been the continuing difficulties of the raw material producing countries, which have suffered from fluctuations in the prices for their products and from a general decline in export earnings. In these, my concluding remarks, I shall first refer to these two topics.

As regards the policies which should follow from the general strengthening of the monetary structure, I noted that Governors who referred to this subject based their observations on the underlying assumption that this strengthening has a secure foundation, and therefore expected it to continue in years to come. For that reason, it should serve as a basis for constructive policies. Now that all major trading currencies have become convertible, it seems to be generally agreed that there is no longer any balance of payments justification for the practice of discrimination. Some Governors have taken the occasion of these meetings to announce important recent steps in reducing discrimination and to reaffirm their intention of continuing this process in the coming months. Governors clearly feel that the time has come for the Fund to state its position on this question. I expect the Executive Directors to discuss this matter and to agree upon a policy statement in the very near future.

A further question concerns a move from Article XIV to Article VIII by those member countries which are ready for such a step as a result of the improvement in their internal and external conditions. I mentioned in my opening remarks that the various questions which arise in this connection require careful consideration in all their aspects, and that they are to be taken up by the Executive Directors in the very near future. I find that all Governors who referred to this problem have welcomed this. Some of the issues are complicated, and the conclusions will be of considerable importance for the future work of the Fund; I trust, therefore, that governments will await the studies which are being prepared by the staff, and consider the views of the Executive Directors, before they take any definite decisions. I have no doubt that it will be possible to arrive at constructive solutions.

I now come to the second topic which has been widely mentioned in the discussions of the Governors, the problems of the raw material producing countries. By and large, these countries are the ones that are most anxious to develop their economies in order to improve the standard of living of their peoples and to diversify their production. This whole complex of problems is, naturally, increasingly engaging the Fund’s attention since, as I mentioned in my opening remarks, one of the Fund’s tasks is to facilitate the expansion and balanced growth of international trade and to contribute thereby to the development of the productive resources of all members as primary objectives of economic policy.

Several Governors have suggested that the Fund should consider the possibility of financing commodity agreements or, in other ways, providing compensatory financing for short-term fluctuations in export receipts. One of these Governors, the Governor for Malaya, recognized that the financing of commodity agreements would not fall within the general rules of the Fund, and he mentioned the possibility of setting up a special institution for the purpose.

So far as compensatory financing is concerned, the Fund’s activities over recent years show that not a few of the countries that have turned to the Fund with requests for drawings have done so because they experienced difficulties through a decline in their export earnings. The Fund has been able to grant them assistance because the conditions have been such as to hold out the hope of restored balance within a relatively short period. The Fund can properly make its resources available only when there is the likelihood that the drawings can be reversed within three to five years. However, within these limits, the Fund has been able to give active support to countries suffering from temporarily lower earnings, and in this way some useful results have already been obtained.

I would further point out that the Fund’s general attitude toward the elimination of discrimination and the reduction of restrictions can also be of help to the raw material producing countries, by enlarging the markets for their products. I have no doubt that great attention will be devoted to problems arising in this field, and that the main objective continues to be to facilitate the expansion and balanced growth of international trade on the widest basis. Insofar as the Fund can contribute to the maintenance of a high level of demand in the industrialized countries which are a market for primary products, it also renders a definite service to the underdeveloped countries.

These have been the main topics raised in the discussions, but I would also like to make a few additional remarks. I am naturally most grateful for the appreciative references made to me personally, and in general to the work in the Fund. I know more than anybody else what devoted and effective work is carried out by the Deputy Managing Director, Mr. Cochran, and I am glad that references have been made to his contribution. Through the annual Article XIV consultations and in other ways, members of the staff are individually well known to many of you; their tasks in Washington and on visits to the various member countries are arduous, and often involve discussion of serious and intricate problems, and it is therefore very gratifying to know that their work and their personal efforts are so well appreciated. I am sure that the Article XIV consultations have become a particularly useful form of cooperative contact, helping countries to assess the condition of their economy and the policies they follow. I would indeed think that there will be general agreement with the view expressed by the Governor for the United Kingdom that this kind of contact should continue to the benefit of the Fund and its members. I am also glad to have heard the reference to the quality of the Fund’s Annual Report, which, as you know, is a report of the Executive Directors. The organization of the Fund is such that the services of the Executive Directors are available to the members of the Fund at all times. It is well to remember that the 18 Executive Directors are drawn from countries and areas in all parts of the world. They help to guarantee a high degree of impartiality in the work and assure continuous regard for the diverse interests of the members of the Fund.

In the course of discussion, many Governors have referred to conditions in their own countries. We have heard from the Governors of countries which have introduced stabilization programs of the considerable efforts they have made, and of the success which over a very large field has been the result. We have heard other Governors explain fully and frankly the problems which their countries encounter. I would like to say that the clear statement by the Governor for the United States has been much appreciated. There has been a sense of realism in the discussion at this Annual Meeting, which explains the close attention that has been devoted to the discussion. In my opening address, I ventured to express the opinion that in all likelihood world inflation was over. This was not meant as a comforting statement, inducing members to take a complacent attitude toward this vital problem. Rather the contrary. My belief is that strong forces in the world economy will act as a brake on price increases, and that the international trend will therefore be toward stability. If any individual country embarks on inflation, it will do so at its own risk, for gone are the days when any one country which inflated might hope to be saved by inflation elsewhere. The balance of payments difficulties that would quickly ensue might even make it hard to maintain a high level of employment.

I would not, however, wish to finish on this note of warning. There have been great achievements in the year that has passed, and foundations have been laid for further constructive policies. I do believe that in the great majority of countries public opinion has become aware of the advantages which can be obtained from the possession of a good currency, and I also believe that it is becoming more and more understood that monetary stability and a vigorous economic expansion are not incompatible objectives.

Delivered at the Closing Joint Session, October 2, 1959.

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