Thirty-seven members drew a record $3,552 million from the Fund in 1968, a year which also witnessed severe disturbances in the flow of international payments and substantial changes in the distribution of world reserves. The first quarter of 1968 was marked by a surge in private demand for gold which led in March to the establishment of a two-tier price system for central banks and private transactions. In May, disruption of French economic activity added strains for the franc and several other currencies, and a new speculative wave in November manifested itself in demand for German marks. An upturn in world trade was another feature of the year. Fund statistics showed a rise in trade during 1968 of between 10 to 12 per cent, twice the rate of increase achieved during 1967. This increase was particularly marked for the industrial nations, although the less developed countries were also able to raise export performances above the levels of 1966 and 1967.
Fund transactions during the year included Canada’s drawing of $391 million in February, and a $200 million drawing by the United States in March. In June, the Government of France obtained $885 million from the Fund by liquidating its creditor and gold tranche positions and the United Kingdom drew the equivalent of $1.4 billion under a stand-by arrangement approved in November 1967 following the devaluation of the pound. With repurchases during 1968 totaling $1,178.5 million, net drawings on December 31 stood at $5,084 million, after reaching a peak of $5,653 million on June 30. Fund membership at the end of 1968 was 111 countries with quotas totaling $21,198 million in gold and currency. Four new members—Botswana, Lesotho, Malta, and Mauritius—were admitted to membership during the year.
Nineteen developing countries of Asia, Latin America, Africa, and the Middle East, as well as Turkey and Iceland, drew a total of $193.3 million from the Fund during the last quarter of 1968. Pakistan’s purchase of the equivalent of $40 million was the largest of these and was under a stand-by arrangement approved in October. Other major drawings under stand-by arrangements during the quarter were by Peru ($25 million), Morocco ($20 million), Korea ($12.5 million), Columbia ($10 million), and Turkey ($10 million). Iran made a drawing of $15.3 million in November.
In November Iceland drew the equivalent of $3.8 million under the Fund’s compensatory financing facility to assist it in meeting payment difficulties caused by a temporary shortfall in export earnings during the 12 months ended September 30, 1968. Problems in the country’s fishing industry were caused by several factors including bad weather conditions, unpredictable movements of herring shoals, and the weakening trend in world prices for several fishery products.
|MEMBER||MONTH||AMOUNT ($ million)|
|Total drawings in the fourth quarter of 1968||193.32|
|Total net drawings at the end of the fourth quarter of 1968||5,086.20|
|MEMBER||MONTH||AMOUNT ($ million)|
At the end of 1968, the Fund had 27 stand-by arrangements in effect with a total of $339.3 million available under these arrangements. Twenty-nine such arrangements were approved during the year. Six arrangements were approved in the last quarter with those for Pakistan and Peru totaling $75 million each. The arrangement for Pakistan was in support of measures by the national authorities aimed at sustaining the impressive rate of growth recorded during the country’s second Five-Year Plan (1960-65) and at the fuller utilization of Pakistan’s productive capacity. The arrangement for Peru was to provide the national authorities with a secondary line of reserves while a program was carried out to balance the budget and to restore confidence in the Peruvian sol.
Morocco received a stand-by arrangement in October for $27 million which succeeded an arrangement for $50 million approved in 1967. The new arrangement was to assist stabilization efforts and the continuance of Morocco’s liberal trade policies during a period when large debt service payments fall due for wheat imports made during the crop failures of 1966 and 1967. A stand-by arrangement of $12 million for the Sudan was to help maintain present exchange and trade policies while the national authorities continued their efforts toward an improved internal financial situation. Paraguay’s arrangement of $7.5 million in December was also in support of a stabilization program, designed to keep the payments deficits during 1969 within tolerable limits through the improvement of public finances. Tunisia received a stand-by arrangement for $6 million in December in support of a financial program aimed at internal price stability and external equilibrium during 1969, the first year of its Four-Year Development Plan.
Repayments by repurchase of currencies during the last quarter of 1968 totaled $581.31 million. The United States accounted for $284.25 million of this, and the United Kingdom for $100 million.
The United States’ indebtedness to the Fund was $728 million at the end of the first quarter of 1968, after reaching a peak of $905 million in December 1966. Sales of U.S. dollars to other members and repurchases by the United States of dollars with European currencies equivalent to $125 million in November and $159.3 million in December, reduced the Fund’s holdings of dollars to subscription level by the end of the year, and restored the U.S. gold tranche position completely. The United Kingdom made a repurchase of $100 million in November against its drawing of $1.4 billion in May 1965. Together with a repurchase of $85 million in August, its net drawings were reduced to approximately $2.7 billion by December 31.
Other major repurchases during the last quarter were by Peru ($42 million), India ($40 million), Finland ($31.3 million), and New Zealand ($29.3 million).
The Fund sold 18 currencies during 1968, of which the largest amounts were in Deutsche mark ($841 million), U.S. dollars ($806.2 million), Italian lire ($478 million), Netherlands guilders ($298 million), and Belgian francs ($246.5 million). The Fund also sold more than $100 million each in Australian dollars, Canadian dollars, and Japanese yen. Sales of Latin American currencies totaled $120 million, more than double the 1967 figure, mainly through the use of Argentine and Mexican pesos. Fund holdings of European currencies at the end of December reflected the large-scale drawings which have taken place over the past 12 months. Deutsche mark held by the Fund were at 17 per cent of quota compared with 26 per cent a year earlier. Netherlands guilders were down to 25 per cent from 40 per cent in December 1967. At the end of 1967 France was a creditor currency in Fund transactions with holdings reduced to 24 per cent of quota, while at the end of 1968 Fund holdings had risen to almost 100 per cent of quota. Holdings of pounds sterling rose during the year from 142 per cent to 193 per cent of quota.
Acceptance of Article VIII
In November, the Fund noted the acceptance by Malaysia and Singapore of obligations of convertibility expressed in Article VIII of the Fund’s Articles of Agreement. Thirty-four members of the Fund have now assumed Article VIII status. Members accepting these obligations undertake to avoid imposing restrictions on payments of current international transactions and to avoid engaging in multiple exchange rates or discriminatory currency practices without first obtaining the approval of the Fund.
In November Iceland announced a change in the par value of the Icelandic kronur to IKr 88.000.0 per U.S. dollar from the previous par value of IKr 57.000.0 per U.S. dollar.
General Arrangements to Borrow
The Fund made a repayment in November of $100 million in six currencies previously borrowed under its General Arrangements to Borrow (GAB). The repayment was made after the United Kingdom repurchased from the Fund pounds sterling equivalent to $100 million in the same month. This repayment by the Fund was in respect of a borrowing from eight participants in the GAB of an amount equivalent to $525 million to help finance a purchase by the United Kingdom of the equivalent of $1.4 billion in May 1965. At the end of 1968, the total of the Fund’s outstanding GAB borrowings was $1,046 million.
Acceptances of the Amendment to the Fund’s Articles of Agreement which would establish a facility in the Fund based on special drawing rights and effect certain changes in the Fund’s practices and procedures were received during the last quarter of 1968 from ten members: Australia, Dominican Republic, The Gambia, Ghana, Guinea, Guyana, Jordan, New Zealand, Trinidad and Tobago, and the United Arab Republic. This raised the number of acceptances to 27 countries representing 47.22 per cent of total voting power in the Fund. The Amendment will become effective after it has been accepted by three fifths of the members having four fifths of the total voting power. Instruments setting forth that the member undertakes all the obligations of a participant in the Special Drawing Account had been deposited in the Fund by seven countries as of December 31, 1968: they were Australia, the Dominican Republic, New Zealand, Sierra Leone, the United Arab Republic, the United Kingdom, and the United States.