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Finance & Development, December 1976
Article

Fund activity: More gold auctions; Interim Committee meeting; Fund history 1966-71 prepared; developments in the world economy, a selection from the Annual Report; other selected data on Fund transactions

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
December 1976
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The third gold auction by the Fund, as the trustee of the Trust Fund, was held on September 15, 1976, and 780,000 ounces of fine gold—the total amount for which bids were invited—were awarded to successful bidders at bid prices ranging from $108.76 to $114.00 an ounce. The average price of successful bids was $109.40 an ounce. This was one of a series of auctions implementing the decision of the Interim Committee that a total of 25 million ounces of gold from the Fund’s holdings is to be sold over a four-year period. The first auction was held on June 2, 1976, and the second on July 14, 1976.

Bids were received for a total quantity of 3,662,400 ounces in the third auction. Of this quantity, 878,800 ounces were bid at $108.76 or higher. One bidder offered $108.76 for 106,400 ounces but this bid was met only in part. The gold is to be delivered at the Federal Reserve Bank of New York, U.S.A.

After payment has been made by the Trust Fund for the gold at the equivalent of SDR 35 a fine ounce, the award of 780,000 ounces at the third auction will yield a net sum of approximately $54 million for the benefit of developing countries. The total amount available from the first three gold auctions is about $184 million.

The terms and conditions of the gold auction state that no bid may be submitted by the government or monetary authorities of a member of the Fund or by an agent acting on behalf of these authorities, at a price inconsistent with the Articles of Agreement of the Fund. The Bank for International Settlements may submit bids. Each bidder is regarded as bidding on its own behalf if it submits a bid in its own name and for its own account and acquires ownership of gold as a result of a bid.

In the first gold auction, the prices offered by successful bidders ranged from $126.00 to $134.00 an ounce and averaged $126.98 an ounce. In the second auction, held on July 14, the Fund awarded 780,000 ounces of gold to successful bidders at a common price of $122.05 an ounce; bids submitted by successful bidders had ranged from $122.05 to $126.50 an ounce.

The major portion of the profits from the auctions—after payment for the gold at the equivalent of SDR 35 an ounce—will be available to finance loans by the Trust Fund on concessionary terms to eligible developing countries.

The Trust Fund was established in May 1976 (see “The Trust Fund,” by Ernest Sturc, page 30 in this issue) to provide special balance of payments assistance to developing members with the profits from the sale of the Fund’s gold, and with any financing that may be available from voluntary contributions or from loans.

…Four auctions net $245 million for Trust Fund

The International Monetary Fund held its fourth gold auction as trustee for the Trust Fund on Wednesday, October 27, 1976. The Fund awarded 779,200 ounces of fine gold—800 ounces less than the total amount for which bids were invited—to successful bidders at bid prices ranging from $116.80 to $119.05 an ounce, with an average price of $117.71. The final 800 ounces could not be awarded because the amount was less than the minimum award of approximately 1,200 ounces provided for under the terms and conditions of the auction. Altogether, in the fourth auction, bids were received for a total of 4,214,400 ounces. As in previous auctions, the gold is to be delivered at the Federal Reserve Bank of New York.

Net of payment by the Trust Fund for the gold at the equivalent of SDR 35 per fine ounce, the award of 779,200 ounces will yield approximately $60.2 million for the benefit of developing countries, bringing the total amount available from the four auctions held so far to about $245 million.

Fund holdings of selected currencies as at September 30, 1976(In millions of SDRs)
AmountPer cent of quota
Austrian schillings21.78
Belgian francs43.37
Brazilian cruzeiros297.868
Canadian dollars591.654
Ecuadoran sucres15.447
French francs697.246
Deutsche mark134.78
Guatemalan quetzales24.067
Irish pounds59.149
Japanese yen60.15
Kuwaiti dinars8.313
Luxembourg francs12.060
Malta pounds2.214
Netherlands guilders173.925
Norwegian kroner103.643
Qatar riyals3.618
Swedish kronor159.049
U.A.E. dirhams0.96
U.S. dollars3,284.349
Venezuelan bolivares18.26

Interim Committee emphasizes surveillance and management of monetary system

The Interim Committee of the Board of Governors on the International Monetary System held its sixth meeting in Manila on October 2, during which it reached agreement on the need for the adjustment of member countries’ external positions, the obligation of the Fund to exercise firm surveillance over the exchange rate policies of members, and the importance of keeping all aspects of international liquidity under review. The Committee also reviewed the financial activities and the liquidity of the Fund.

At a press conference following the meeting, the Committee’s Chairman, Mr. Willy De Clercq, the Belgian Finance Minister, commented that in its previous meetings the Committee had focused especially, but not exclusively, on the task of drafting the Proposed Second Amendment to the Fund’s Articles. He said the Committee can now address itself more to the task of the expert surveillance of the management and adaptation of the monetary system.

Mr. De Clercq said that the members of the ministerial level Interim Committee had agreed that economic recovery was under way, but expressed their concern about the high levels of unemployment and the high rates of inflation in many countries.

This conclusion was underscored by the Committee in its communique. With respect to the international adjustment process, the Committee reported it had reached the following conclusions.

(a) In view of the recovery in the world economy, the Committee believed that the adjustment of external payments positions, which should be symmetrical between deficit and surplus countries, is now both urgent and opportune. (b) To this end, deficit countries should arrange their domestic policies so as to restrain domestic demand and permit the shift of resources to the external sector, (c) Industrial countries in strong payments positions should ensure continued adequate expansion in domestic demand, within the limits set by effective anti-inflationary policies, (d) Exchange rates should be allowed to play their proper role in the adjustment process. (e) In the context of the use of the Fund’s resources, adjustment by deficit countries can be promoted by a larger use of the credit tranches and the extended Fund facility.

Fund history 1966-71 due for release

A two-volume history covering the work and evolution of the Fund during the six years 1966 through 1971 is due to appear early in 1977. The history, entitled The International Monetary Fund, 1966-1971: The System Under Stress, was written by Margaret Garritsen de Vries, the Fund’s Historian.

The first volume traces in detail the negotiations leading to the creation of a new reserve asset, starting with the earliest discussions about international liquidity and culminating in the establishment of special drawing rights. It recounts the unprecedented recourse to the Fund’s financial resources by its members, especially in 1968 and 1969; the expansion of quotas in 1970; and the significant changes in the Fund’s policies regarding the use of its resources. This volume also describes the severe crises in gold markets and in exchange rates during the late 1960s and early 1970s, beginning with the devaluation of sterling in November 1967 and ending with the Smithsonian agreement of December 1971. A final section explains how the Fund has evolved as an international institution and describes some of its new activities.

The second volume makes available for the first time seven draft outlines for reserve-creating schemes prepared in the Fund. These are part of the process by which SDRs were established. This volume also reproduces the most important documents that the Fund published from 1966 until the end of 1971.

Selected data as at September 30, 1976(In millions of SDRs)
Gold Account Bars5,287.6
SDRs in General Account562.4
Stand-by arrangementsAmount agreedAmount purchasedUndrawn balance
Argentina260.0159.5100.5
Burundi6.56.5
Costa Rica11.611.6
Grenada0.2250.225
Guyana7.257.25
Haiti6.886.88
Liberia5.05.0
Nepal4.4954.495
Panama9.09.0
Romania95.095.0
South Africa152.075.077.0
United Kingdom700.0700.0
Uruguay25.025.0
Western Samoa0.50.5
Zaire40.9640.96
Zambia62.08.553.5
Subtotal1,386.411,050.47335.94
Extended arrangements
Kenya50.1 17.742.4
Philippines Total90.0 290.0
Total1,526.511,148.17378.34
Summary of transactions, January 1-September 30, 1976(In millions of SDRs)
Total purchases6,179.4
Gold tranche purchases875.5
Credit tranche purchases1,255.1
Extended facility purchases90.0
Compensatory financing purchases1,815.5
Oil facility purchases2,143.4
Total repurchases1,109.1
Net drawings
September 30, 19744,402.7
September 30, 19758,513.3
September 30, 197614,370.6
Note: Details may not add to totals due to rounding.

This new history of the Fund is based on official records and documents, particularly minutes of the meetings of the Executive Board. However, material covering the Fund staff’s analyses, the Managing Director’s actions, and international economic and monetary events and discussions that influenced the Fund’s actions in the years 1966-71 is also presented in these two volumes.

The publication of these two volumes is a sequel to the three-volume history of the Fund published in 1969, which covered the first twenty years of the Fund’s existence—1945-65.

The author, Mrs. de Vries, was among the first members of the staff of the Fund, having joined the Research Department in 1946. She has held various positions on the staff, including Chief of the Far Eastern Division from 1957 to 1959. From 1963 to 1973 she served as a Consultant to the Fund, and has been Historian since May 1973. She is a co-author of the earlier volumes of the Fund’s history.

Developments in the world economy

A selection from the Fund’s Annual Report, 1976

Major Oil Exporters: Changes in Trade with Industrial Countries. First Half 1974-First Half 1976

(Semiannual percentage changes in trade values, expressed in U.S. dollars)

Non-Oil Primary Producing Countries: Changes in Trade with Industrial Countries. First Half 1974-First Half 1976

(Semiannual percentage changes in trade values, expressed in U.S. dollars)

Industrial Countries: Changes in Import Volume and Export Prices, 1974-March 1976

(Quarter-to-quarter movements in per cent)
Summary of Payments Balances on Current Account 1(In billions of U.S. dollars)
1973197419751976

(Projection) 2
Major oil exporters6673540
Industrial countries12-10193
Non-oil primary producing countries
More developed1-14-14-10
Less developed-10-29-37-32
Total391433
Sources: Data reported to the International Monetary Fund and Fund staff estimates.
Table 1.Growth of World Output, 1960-75(Percentage changes in real GNP or GDP)
Annual Average1Change from Preceding Year
1960-701960-651965-7019711972197319741975
Industrial countries4.85.14.53.75.76.0-1.5
Canada5.25.64.86.55.97.23.20.6
United States4.04.73.13.05.75.5-1.7-1.8
Japan10.810.011.67.39.19.9-1.22.0
France5.75.75.65.35.75.83.8-2.5
Germany, Federal Republic of4.95.04.83.03.45.10.4-3.4
Italy5.75.25.91.63.16.83.4-3.7
United Kingdom2.73.22.22.03.15.5-0.1-1.7
Other industrial countries4.85.04.63.44.34.43.5-1.8
Primary producing countries5.65.35.85.45.56.85.63.5
More developed5.85.95.85.75.66.24.01.6
Less developed5.55.15.85.35.47.16.24.2
World25.05.14.84.15.76.11.1-0.5
Sources: National economic reports, IMF Data Fund, secretariat of the United Nations, U.S. Agency for International Development, International Bank for Reconstruction and Development, and Fund staff estimates.

Note: The country groupings not specified in the tables and charts above are as follows:

“Other industrial countries”: Austria, Belgium, Denmark, Luxembourg, the Netherlands, Norway, Sweden, and Switzerland.

The “Primary producing countries” are subdivided into “More developed” (Australia, Finland, Greece, Iceland, Ireland, Malta, New Zealand, Portugal, Romania, South Africa, Spain, Turkey, and Yugoslavia); and “Less developed,” comprising Fund member countries not listed as “Industrial countries,” or as being “More developed.”

The less developed countries are subdivided into the “Major oil exporters” (Algeria, Bahrain, Indonesia, Iran, Iraq, Kuwait, the Libyan Arab Republic, Nigeria, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela), and “Other developing countries” (or “Non-oil developing countries”).

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