1967 began with few Fund members near their drawing limits, although the total of drawings outstanding from the Fund was a record figure. During the first quarter of the year, 11 countries drew currencies equivalent to $285.5 million, raising total drawings on the Fund to an aggregate of more than $13 billion. By March 31, drawings outstanding from the IMF were $5.07 billion; repayments during the quarter totaled $64 million.
A drawing in January by Spain was equivalent to $166 million in nine currencies; this corresponded approximately to the amount of Spain’s gold tranche position in the Fund. It was Spain’s first use of the Fund’s resources since 1959.
The Spanish drawing included Venezuelan bolívares, representing the initial use of this currency in Fund drawings. Drawings during the quarter also included for the first time Brazilian cruzeiros and Malayan dollars, when Colombia and Ceylon received these currencies in drawings made in March under the Fund’s compensatory financing facility (see below).
During the first quarter of 1967 stand-by arrangements totaling $287.25 million were concluded with nine nations in Africa, Asia, Europe, and Latin America. The Fund’s assistance to these countries (Brazil, Burundi, Finland, Guyana, Korea, the Philippines, Somalia, Turkey, and Yugoslavia) illustrate some of the needs served by this facility.
The stand-by facility was established by a decision of the Fund’s Executive Directors in 1952. It is an arrangement that assures a member of its right to draw a stated amount of foreign exchange, under certain conditions, over a period as long as 12 months. In general, repayment terms (3 to 5 years), charges, and financial criteria are the same as for all drawings. But since a stand-by arrangement requires an assessment of the member’s financial prospects in later months, a statement of policy intentions is expected as a part of the arrangement.
The first arrangement in 1967 was in January for $45 million to assist Yugoslavia to liberalize its import and foreign exchange procedures. The Philippine arrangement for $55 million in January will help to maintain the country’s exchange and trade system free of restrictions and to promote its development in conditions of monetary stability. There followed a $5 million arrangement for Somalia, where foreign exchange income from banana exports is vulnerable to floods and droughts at home and to competitive markets abroad.
Guyana’s initial stand-by arrangement for $7.5 million in February, accompanies a program directed toward domestic and external balance which is based partly on plans for new taxes. Guyana also established a par value for its currency in agreement with the Fund, and became the twenty-eighth member to undertake the obligations for currency convertibility contained in Article VIII of the Fund Agreement.
Turkey’s $27 million stand-by lends support to the country’s efforts to maintain a 7 per cent growth rate together with stable prices. The country’s reserve position is sometimes affected by failures in food crops, which lead to increased imports, and by reduced earnings from major export items such as cotton and tobacco.
Brazil’s new arrangement for $30 million parallels a continued effort to achieve financial stability, and succeeds an arrangement during which the member in fact reduced its Fund indebtedness. In the largest stand-by arrangement so far this year, Finland gained approval for drawings up to $93.75 million. It strengthens the country’s reserve position at a time of decline in exports of wood and paper products, and unusually large payments against imports.
Korea’s stand-by for $18 million will assist in strengthening the fluctuating unitary exchange rate system introduced in 1965 and will facilitate the elimination of restrictions on current payments. The new arrangement for $6 million for Burundi will help to meet temporary payments difficulties caused by a decline in world prices for Burundi coffee.
The Fund’s financial support in the form of a 12-month stand-by arrangement, or line of credit, has continued in active use over the past 15 years. Approximately one third of the total drawings on the Fund have been made in accord with 182 stand-by arrangements approved on behalf of 55 member nations, with some countries maintaining successive arrangements over periods of eight or nine years. The Fund has granted stand-by arrangements in order to sustain confidence in currencies, to provide additional resources during seasonal difficulties, to support programs intended to stabilize economies, to provide backing for monetary reforms, and for other purposes. They are sometimes requested as a precautionary measure with little expectation that drawings will be made, and have often expired unused. But they enable the authorities to administer import policies in the knowledge that a secondary line of reserves is available if needed. The Fund’s stand-by support may also facilitate the negotiation of other external credit for the country’s public and private sectors.
Undrawn balances available to members under their Fund stand-by arrangements reached a peak of $1.7 billion in 1963, when the United Kingdom alone was authorized to draw $1 billion. The U.K. arrangement was subsequently utilized in full. More recently the stand-by facility has been used in smaller total amounts, but always with at least 20. developing countries participating. The undrawn balances of stand-by arrangements in effect on March 31, 1967 were equivalent to $377 million.
Compensatory Financial Assistance
In March, Ceylon and Colombia drew $19.5 million and $18.9 million, respectively, under the Fund’s facility of compensatory financial assistance to members experiencing a temporary shortfall in total export earnings attributable to circumstances beyond their control. Declining world commodity prices during 1966 affected Colombia’s coffee export receipts and Ceylon’s earnings from exports of tea, rubber, and coconut products.
The facility of compensatory financing of export fluctuations which was liberalized in 1966 (see Finance and Development, Vol. Ill, No. 4, December 1966) is designed particularly to benefit primary producing countries. A member may obtain financial assistance from the Fund up to an amount equivalent to 50 per cent of its quota to compensate for temporary shortfalls in receipts from the medium-term trend value of exports, with the qualification that, except in the case of shortfalls resulting from disasters and major emergencies, outstanding drawings may not increase by more than 25 per cent of quota in any 12-month period.
Membership in the Fund increased to 106 nations when Indonesia rejoined the IMF in February with a quota of $207 million. Indonesia had joined the Fund in April 1954 and withdrew its membership in August 1965.
Total quotas in the Fund stood at $20.89 billion at the end of the quarter, reflecting Indonesia’s membership and quota increases for seven member nations (the Dominican Republic, Ivory Coast, Jordan, Lebanon, Malaysia, Turkey, and Viet-Nam) under the general increase in Fund quotas which went into effect in 1966.
In February, Guyana announced an initial par value for its currency at G$l = US$0.58. Until 1965, the only currency in circulation in Guyana was the West Indian dollar issued by the British Caribbean Currency Board. The value of the Guyana dollar was fixed at parity with the West Indian dollar in November 1965 by the Bank of Guyana.
February saw the introduction of new currency units in Ghana and Brazil. In Ghana, where the new cedi is equivalent to 1.2 old cedis, the move did not involve any appreciation or depreciation of its currency. The Brazilian move introduced a new cruzeiro with a value of NCr$2.7 per U.S. dollar.
|Member||Month||Amount ($ million)|
|Member||Month||Amount ($ million)|
|Total drawings in the first quarter of 1967||285.50|
|Total net drawings at the end of the first quarter of 1967||5,077.80|
FUND STAND-BY ARRANGEMENTS
USE OF FUND’S RESOURCES
Central Banking Legislation
Volume II: Europe
Statute and related materials selected and annotated by Hans Aufricht
With the assistance of Jane B. Evensen
“This book is a sequel to Hans Aufricht’s earlier collection of central bank, monetary and banking law’s, which was published by the International Monetary Fund in 1961 under the title of Central Banking Legislation.
“The first volume, selling out the central banking, monetary and banking laws of the United Kingdom and a representative selection of twenty countries outside Europe, has established itself as a standard work of reference in its field. As such, it has proved valuable not only to the work of the Fund but also to scholars, bankers, technicians and legislators throughout the world.”
From the Preface by
From the reviews of Volume 1
“Such a comprehensive collection of monetary regimes, containing not only the central banking legislation, but the other monetary laws us well, has thus far been lacking in the literature … It presents, as it were, a sample collection of monetary laws, and thus qualifies us a practical guide for the legislative bodies of those countries whose monetary structures have not yet been given concrete form or need to be revised. Obviously, this was a major consideration for the author and the International Monetary h-und. which published the work.”—Weltwirtschaftliches Archiv
“… The volumes utility should … not be restricted to bankers, practitioners and international civil servants, but should prove valuable to students, teachers and others interested in comparative law and international finance.”—American Journal of International Law
“… this extremely valuable work …”—The Annals
“… Undoubtedly invaluable …”—Journal of Business Law
“… a standard work of reference …”—Journal of the Institute of Bankers.
The second volume of Central Banking Legislation presents the consolidated versions of laws and regulations on central bunking, banking, money, and the Bretton Woods Agreements for Austria, Belgium. Denmark, Finland, France. Germany. Greece. Iceland, Ireland, Italy, the Netherlands. Norway, Portugal, Spain. Sweden. Switzerland, and Yugoslavia. A series of Appendices tabulates comparative information on the capital and administrative structure of the central bank in each of these countries: provides information on the Geneva Conventions relating to bills of exchange, promissory notes, and checks; gives the text of the International Monetary Fund’s General Arrangements to Borrow: and contains a description of the monetary regime of Luxembourg and notes on Andorra. Liechtenstein, Monaco. San Marino, and Vatican City.
Volume II will be sent postpaid for US$10 or the approximate equivalent in the national currency of most countries.
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