Concluding Remarks by the Chairman of the Executive Board and Managing Director of the International Monetary Fund1, Per Jacobsson
- International Monetary Fund. Secretary's Department
- Published Date:
- November 1958
In the life of international and other institutions, some meetings are necessarily more routine than others, but this meeting may one day stand out as one of historic importance in the field of financial cooperation. I refer, of course, to the adoption by the Board of Governors of the Resolution instructing the Executive Directors to consider the question of the enlargement of the Fund’s resources. The varied implications and problems involved in such a step have been emphasized by individual Governors, and there is no need for me to add any further words with regard to the substance of the question raised in the Resolution. I would, however, refer to certain procedural matters. Several Governors, particularly those of the United States and the United Kingdom, have asked for prompt consideration of this question by the Executive Directors so as to make possible the submission of a concrete proposal to the Board of Governors by the end of this calendar year. It will, of course, be for the Executive Directors themselves, at an early date, to decide how they will handle these problems. I may say that once it became clear that this question would be raised at this meeting, especially after the publication of the exchange of letters between the President and the Secretary of the Treasury of the United States, the staff began work on the legal, economic, and other aspects of an increase in Fund quotas. This work is now being intensified, and I am therefore certain that the Executive Directors will in a few weeks have in their possession preliminary material useful for their deliberations.
In their comments on the question of the enlargement of the Fund’s resources, and also in other connections, several Governors have expressed their views on the proper use of these resources. On the one hand, it has been urged that more account should be taken by the Fund of the formidable difficulties which face countries struggling to develop their economies; and, on the other hand, stress has been laid on the danger that too lenient a policy may support, and perpetuate, inflationary tendencies in the countries receiving financial assistance from the Fund. The basic principles governing access to the Fund’s resources have been the result of hard and deeply considered work by the Executive Directors over many years, as the Governors are well aware, and have been formulated in various Annual Reports placed before this Board. They have been applied to the many transactions that the Fund has undertaken with countries in every stage of development, and in many continents. These principles have, I think, shown themselves to be eminently practical in very varied conditions, and thus have stood the test of experience. If it is not in every case possible to attain all at once what would be desirable, care is always taken at least to envisage progressive achievement of that degree of stability which the Fund and the country concerned must always seek. When the attainment of stability requires, as is sometimes the case, a radical alteration of existing policies and practices, a difficult and delicate judgment needs to be exercised as to the speed at which a series of measures can be taken.
The great majority of countries which have in recent years made use of the Fund’s resources have been countries in process of development. This is clear evidence of the fact that countries whose major need is for long-term capital for development purposes are not, for that reason, debarred from the use of the Fund’s resources, although we must be careful, even though this may often be difficult, to draw the proper line between a temporary imbalance and one which has a more fundamental cause. I would like, in this connection, to refer to the thoughtful statement by the Governor for India, Mr. Desai, in which he pointed out that the underdeveloped countries, though they are in need of a steady stream of long-term capital, may also be exposed to the risk of temporary balance of payments difficulties. The justification for the Fund making its resources available must always lie in its conviction that in each case the assistance that is needed is temporary, and that the resources supplied will be returned to the Fund within a three- to five-year period.
In the case of transactions with underdeveloped countries, as with others, therefore, the ordinary rules for the use of the Fund’s resources in the various tranches remain applicable, so that when a request is made the proper justification must be provided, including, for drawings in the higher tranches, the formulation of a program holding out the hope of enduring stability at a realistic rate of exchange. These principles have, in fact, been applied by the Fund in all its transactions, and I do not think that there is any real desire or intention to depart from them.
May I, in this connection, express a personal view: I have found that the same basic monetary and credit principles apply in all countries whatever their stage of industrialization. These principles are the result of experience over many years, mainly—it is true—in Europe, but at a time when many of these countries were still in the early stages of development. I do not wish to be misunderstood, and I should perhaps therefore add that sound money does not mean deflation or stagnation. On the contrary, I think the experience of many countries has shown that sound monetary conditions are the only true basis for expansion. Naturally, the general trend of world trade will be determined by the action taken in the major countries, but I believe that we can confidently say that the leaders in those countries are sufficiently aware of the danger of deflation not to allow the world to fall back into the difficulties of the 1930’s. Of course there will continue to be changes in the prices of various commodities, and there will still be economic fluctuations, but we need no longer fear any long drawn-out period of stagnant trade, for we know that every effort will be made in the individual countries and through international action to provide the basis for an expanding world trade.
In my opening remarks, I referred to the fact that there is as yet no coherent view on the ways in which the domestic savings and foreign resources of underdeveloped countries can best be harmonized to promote development with stability. This, of course, is a matter interesting several institutions other than the Fund, but monetary stability is so close to the heart of the Fund’s activities that we shall, I am sure, have to devote increased attention to this problem in our studies and inquiries. Another matter on which I also touched in my opening remarks was that of the wide fluctuation in the prices of primary products. Many Governors have referred to this important question in the discussion and asked that the Fund should specifically occupy itself with the consideration of this problem. We certainly cannot escape this problem, for it affects us almost daily in our work with member countries. We are, of course, aware of the extent and the complexity of the problem, and the difficulty of arriving at general conclusions, and we also know that other institutions are intimately concerned with these matters, but we shall continue to give this subject close attention.
We in the Fund are most grateful for the many expressions of confidence that have been given us this week. All of us gathered here have, I believe, again found that not the least of the benefits of our international organizations is that the Annual Meetings provide regular opportunities for close personal contact and the discussion of problems outside the formal agenda. This year when we meet away from our headquarters, we have, moreover, been able to become more fully acquainted with the problems of our host country—problems which, in many respects, are typical of those that face so many members of our institution. We are grateful for the magnificent hospitality which we have received from the Government of India, for the excellent practical arrangements under which we have worked, and for the atmosphere of friendliness in which we have met. The name of New Delhi will be linked with this Conference in the annals of monetary history; but more than that, it will also remain for many of those present the place in which they had their first personal experience of the conditions of underdeveloped countries which give rise to problems that will occupy the minds of men for many years to come.