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Recent Activity: International Monetary Fund

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 1968
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During the first six months of 1968, financial operations of the International Monetary Fund climbed to record levels when the $3.2 billion volume of its transactions exceeded the total for any previous calendar year. The Fund’s resources were used during this period by 27 member countries and repayments during the first six months totaled $447 million.

Drawings

In the second quarter of the year, 20 countries drew currencies worth $2.4 billion from the Fund and repayments totaled $208.9 million. Currency sales in June alone were $2.2 billion, the largest figure for Fund operations in any one month. June transactions included a $745 million drawing by France in 14 currencies, a $1.4 billion drawing by the United Kingdom in 19 currencies, and South Africa’s drawing of $62.02 million in 4 currencies.

The drawing by France corresponded to that country’s gold tranche position in the Fund. The South African drawing represented the amount of South African rand which the Fund has provided to other members, and was within that member’s gold tranche position. For the U.K. drawing, the Fund used three sources: its own currency holdings, currencies borrowed from five members under the provisions of the General Arrangements to Borrow (GAB), and the equivalent of $365 million in currencies purchased from members against the sale of gold. GAB countries also participated in the French transaction and in June the Fund consented to a proposal by France to transfer its claim on the Fund, under these arrangements equivalent to $140 million, to four other GAB participants. The resulting changes in the Fund’s indebtedness and the amounts still available under these credit arrangements are shown in an accompanying table.

DRAWINGS BY FUND MEMBERS DURING THE SECOND QUARTER OF 1968
MemberMonthAmount ($ million)
AfghanistanJune4.80
BrazilMay75.00
BurundiApril, May5.00
CeylonApril, May29.80
ColombiaMay10.00
FranceJune745.00
IndonesiaMay16.00
LiberiaMay1.10
MoroccoJune30.00
NicaraguaMay, June10.00
NigeriaApril9.25
PanamaMay3.00
PeruApril21.25
PhilippinesJune10.00
RwandaMay, June2.00
SudanApril2.50
TunisiaApril2.50
Trinidad and TobagoJune4.75
United KingdomJune1,400.00
UruguayMay8.75
Total drawings in the second quarter of 19682,390.70
Total net drawings at the end of the second quarter of 19685,654.00

Net drawings of the United Kingdom climbed to $2.9 billion in the wake of the June transaction and those of the United States showed a substantial decline during the month from $707 million to $299 million. Following its gold sales of $547 million to help finance recent transactions, the Fund’s gold account was $3,281 million. Total gold sales by the Fund since the beginning of operations in 1947 have amounted to $2,438 million.

While drawings by industrial countries have constituted the largest claims on the Fund in this period, financial assistance was also provided during the second quarter of the year the\following developing countries: Afghanistan, Brazil, Burundi, Ceylon, Colombia, Indonesia, Liberia, Morocco, Nicaragua, Nigeria, Panama, Peru, the Philippines, Rwanda, the Sudan, Trinidad and Tobago, and Tunisia.

The six currencies of which the Fund is presently making the largest net use are those of Belgium, Germany, Italy, Japan, the Netherlands, and Sweden. Total currency subscription of these members are equivalent to $2,787 million but the Fund’s holdings of these units at the end of June had declined to $1,002 million. The six members have undertaken to lend the Fund a total of $2,250 million under the terms of the GAB. Currencies of six other members (Australia, Austria, Denmark, Mexico, Norway, and Venezuela) were also below subscription level at the end of June as a result of Fund operations. Other currencies used by the Fund during the first six months of 1968 were Argentine pesos, Irish pounds, and South African rand.

USE OF FUND’S RESOURCES

AT JUNE 30,1968

Stand-By Arrangements

Stand-by arrangements totaling $321.7 million were approved during the second quarter of the year for 10 countries in Latin America, Africa, and Asia. Undrawn balances available to members under such arrangements stood at $479.2 million on June 30, 1968. At mid-year 33 countries had stand-by arrangements with the Fund, 30 of these being developing nations.

Latin American countries accounted in the second quarter for five arrangements totaling $259 million. The arrangement of $125 million approved for Argentina was the largest during the quarter. It provides support for a program in 1968 aimed at improving both the financial stability and the rate of economic growth achieved last year. Price stabilization is an important objective in Argentina’s program and this is to be achieved through credit controls and a further reduction in the budget deficit. Brazil’s $87.5 million arrangement followed a year in which that country recorded a sharp rise in agricultural output, a recovery in industrial production, and a substantial slowdown in its rate of inflation. Brazil’s 1968 program aims at consolidating this progress and at strengthening its payments position. Programs by Colombia and Guatemala to attain equilibrium in internal and external finances are supported by stand-by arrangements for $33.5 million and $10 million respectively. A $3 million arrangement for Panama is to help that country meet a drop in its international reserves during the first quarter of 1968.

Korea’s efforts to maintain its rate of growth will be assisted with a $25 million arangement, while the arrangement of $19.5 million for Ceylon is in support of exchange reform measures introduced in May 1968. The measures provide a more favorable rate of exchange for earnings other than those from Ceylon’s three major exports (tea, rubber, and coconut products).

An arrangement for Ghana of $12 million provides a secondary line of reserves to help that country meet balance of payments pressures arising from uncertainties in the world market for cocoa, and to accelerate growth wit in a framework of financial stability. Liberia’s $3.2 million arrangement is in continued support for a sustained program of economic reform introduced by the Liberian authorities in 1963. A $3 million arrangement for Rwanda is to assist its comprehensive stabilization program in effect since 1966.

Compensatory Financing

Ceylon made a drawing in April of $19.3 million under the Fund’s policy of compensatory financial assistance to countries experiencing a temporary shortfall in total export earnings largely attributable to circumstances beyond their control. Ceylon’s drawing was occasioned by unfavorable world price trends for tea and rubber, which constitute 75 per cent of its total exports. Afghanistan drew $4.8 million under this facility in June to meet a reduction in earnings from karakul skins, cotton, and carpets. It suffered from slack demand in the major importing countries for karakul and carpets, as well as from declines in cotton production due partially to unfavorable weather conditions.

FUND STAND-BY ARRANGEMENTS

AT JUNE 30, 1968 In millions of U.S. dollars
FUND STAND-BY ARRANGEMENTS APPROVED DURING THE SECOND QUARTER OF 1968
MemberMonthAmount

($ million)
ArgentinaApril125.00
BrazilApril87.50
CeylonMay19.50
ColombiaApril33.50
GhanaMay12.00
GuatemalaApril10.00
KoreaApril25.00
LiberiaJune3.20
PanamaMay3.00
RwandaApril3.00
GAB: BORROWINGS AND CHANGES IN INDEBTEDNESS AT JUNE 30, 1968(In millions of U.S. dollar equivalents)
Fund Borrowings for
GAB

Participants
Total

Arrangements
Fund

Indebtedness

Under GAB at

may 31, 1968
U.K. Drawing

of $1.4 billion

under

Stand-by

Arrangements
France’s Gold

Tranche

Drawing of

$745 million
Fund

Borrowings

at

June 19, 1968
Transfer of

France’s

GAB Claim

on Fund
Present Fund

Borrowings
Balances

Available

Under GAB
Belgium15037.55515107.5+ 10117.532.5
Canada200200.0
Deutsche Bundesbank1,000167.5226140533.5+ 80613.5386.5
France550140.0140.0—140550.0
Italy55065.012560250.0+ 40290.0260.0
Japan25025.025.025.0225.0
Netherlands20037.54035112.5+ 10122.577.5
Sveriges Riksbank10017.5301562.562.537.5
United Kingdom857.1*857.1
United States2,0002,000.0
5,857.1*4904762651,231.01,231.04,626.1

Second Term for Mr. Schweitzer

In May it was announced that Pierre-Paul Schweitzer, Managing Director of the Fund and Chairman of its Board of Executive Directors, had been appointed to a second five-year term. His first term expired on August 31.

Special Drawing Rights

The Fund Board of Governors approved in June the Proposed Amendment to the Fund Articles of Agreement which would establish a facility in the Fund based on Special Drawing Rights and effect certain changes in the Fund’s existing practices and procedures. The Amendment was submitted by the Executive Directors to the Board of Governors for their approval in April. It is now being submitted to all members for their formal acceptance. The Amendment will enter into force for all members after it has been accepted by three fifths of the Fund’s membership representing four fifths of the total voting power.

Strong Growth In Technical Assistance Programs

The Fund’s technical assistance programs have been strengthened with the expansion of services extended to its members by the Central Banking Service, the Fiscal Affairs Department, and by the Bureau of Statistics in the field of balance of payments and financial statistics. Since 1964, these services have extended all over the globe, with particular emphasis on the needs of members in Africa and the Western Hempishere. Assistance from the Central Banking Service is in the form of advisory services by outside experts sent on assignments and by regular Fund staff. Thirty-seven countries have received the Department’s assistance since the beginning of the program in 1964 through 40 staff missions and the assignment of 78 central banking experts. The Fiscal Affairs Department provides aid on general fiscal problems as well as intensive technical help on issues specific to particular economies, and the Fund staff has been supplemented by the recruitment of 29 fiscal experts drawn from 13 countries. Regular Fund missions often provide technical help to members in assembling balance of payments and financial statistics. Assistance to members by the Bureau of Statistics has often represented the first attempt at organizing basic financial data, essential not only for the Fund’s own data needs, but to the sound management of the country’s economy. Another aspect of Fund assistance is through the courses at the IMF Institute, to which technicians from member countries are invited.

Forthcoming Publication of the International Monetary Fund:

Surveys of African Economies

Volume I: Cameroon, Central African Republic, Chad, Congo (Brazzaville), Gabon

362 + xxii pages; 7 maps. Price: $5.00 ($2.50 to university libraries, faculty members, and students).

English edition to be published in September; French edition to follow in a few weeks.

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Appendices contain a comprehensive listing of national development plans, a list of central planning agencies and their addresses, and a bibliography on development planning.

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Annual Report of the World Bank and IDA

The Annual Report of the International Bank for Reconstruction and Development (World Bank) and the International Development Association (IDA) will be presented at the Annual Meeting of the Board of Governors to be held in Washington, D.C., September 30-October 4, 1968. The record of the World Bank and IDA operations will be a joint publication.

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IFC Annual Report

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IFC’s 12th year of operations was a milestone in several respects: The Corporation made its largest single investment and undertook its biggest underwriting to date; new levels were reached in the Corporation’s total commitments and in the average size of its principal commitments; and a sharp rise was recorded in sales of IFC commitments to investors in the Corporation’s steadily widening list of financial partners. Other highlights of the year were the Corporation’s active support of national development finance companies and its continuing involvement in efforts to increase fertilizer supply in the developing countries.

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