Chapter

15 The Interim Committee

Author(s):
Margaret De Vries
Published Date:
June 1986
Share
  • ShareShare
Show Summary Details

The Interim Committee has become an integral part of the Fund’s policymaking machinery. At the Committee’s meetings, the highest ranking monetary and financial authorities of the Fund’s members are able to present their views, discuss their differences, and determine whether they are ready to compromise and reach consensus on an issue or whether no consensus is yet possible. These exchanges have been invaluable, both for the financial authorities themselves and for the Fund, especially since the world economy and the international monetary system have, since the mid-1970s, been experiencing more serious problems than at any time since the 1930s.

ORIGIN AND COMPOSITION

In June 1974, the Committee of Twenty, which had been set up in 1972 as a temporary committee with the specific task of negotiating a fully reformed international monetary system, was winding up its work, having concluded that it was impossible for national officials to agree on a reformed system and that consequently the existing international monetary system would be allowed to evolve gradually. In these circumstances, many financial officials felt that there was a compelling need for another body of high-ranking financial officials with major functions and responsibilities in their governments to succeed the Committee of Twenty and to guide authorities as the international monetary system continued to evolve. Amendments to the Articles of Agreement that were to include provision for a permanent Council of Governors were being drafted, but the process of amendment was expected to take at least two years. H. Johannes Witteveen, then Managing Director, therefore suggested establishment of an “interim” group that would function until the Council came into being. For this reason, the Committee was given the name “Interim Committee of the Board of Governors on the International Monetary System.” While the permanent Council was to have decision-making powers, the Interim Committee, like the Committee of Twenty, would be a purely advisory body. On October 2, 1974, when the Board of Governors passed the necessary resolution, the Interim Committee was formed. It held its inaugural meeting the following day.

The Second Amendment of the Articles of Agreement has been in force since April 1, 1978. But the Council, for which provision was made, was never set up. Some national financial officials were reluctant to create a new body with decision-making powers. Some held differing views as to what powers the Council should have and what its relations to the Board of Governors and to the Executive Board should be. Hence agreement on setting up the Council was not possible. In any event, early in the drafting of the Second Amendment many officials who supported the idea of the Council indicated their willingness to accept an indefinite postponement of its creation inasmuch as the Interim Committee had very quickly shown itself to be an extremely useful and effective body. In the absence of the Council, the Interim Committee continued to meet regularly.

Like the Committee of Twenty, the Interim Committee’s composition reflects that of the Fund’s Executive Board. Each member that appoints and each group of members that elects an Executive Director is entitled to appoint one member of the Committee. The Interim Committee is so composed because, after many attempts in the 1960s to set a high level body of monetary officials in the Fund, the geographical representation in the Executive Board was found to be the most acceptable basis for such a body. Each Committee member is a Governor of the Fund, a cabinet minister, or a person of comparable rank. Each constituency can determine freely whom it will appoint and by what procedures. Each Committee member can appoint up to seven Associates, who may attend Committee meetings. Committee members usually appoint as Associates high-level financial authorities of the other countries in their constituency or of their own country. The Executive Directors of the Fund also attend Interim Committee meetings. With the composition of the Committee based on the constituencies of the Executive Board, with each Committee member accompanied by several Associates, and with the presence of Executive Directors, each Fund member is in effect represented at Interim Committee meetings.

Until November 1, 1978, there were 20 members of the Interim Committee; as of December 1985, as a result of expansion of the Executive Board, there were 22 Committee members. In 1978 Saudi Arabia became entitled to appoint an Executive Director, and in 1980 the People’s Republic of China assumed the representation of China on the Executive Board, with an elected Executive Director of its own. Thus, the number of Executive Directors rose from 20 to 22, and Saudi Arabia and China also gained membership on the Interim Committee. Of the 22 members, 11 were from industrial countries—although several of these members were elected by country groupings that also included developing countries—and 11 were from groupings composed exclusively of developing countries. The Managing Director also attends the meetings, accompanied by the Deputy Managing Director and a few senior staff members. A limited number of observers from international and regional economic organizations and from Switzerland (which is not a Fund member) also attend. Thus, as many as 200 persons may be present.

RESPONSIBILITIES AND PROCEEDINGS

The Interim Committee’s responsibilities, as defined in its terms of reference, are to advise and report to the Board of Governors in three specific areas. The first, and primary, area is “supervising the management and adaptation of the international monetary system, including the continuing operation of the adjustment process, and in this connection reviewing developments in global liquidity and the transfer of resources to developing countries.” The Interim Committee was given this task, since, as noted earlier, once the Committee of Twenty had given up negotiation for a fully reformed international monetary system, it was expected that the system would evolve gradually. In effect, the Interim Committee is to advise and report to the Board of Governors on all elements of the international monetary system as the system evolves.

The Committee is thus to make recommendations on the following difficult questions: how balance of payments adjustment should be effected; what role the Fund should play in the vital area of adjustment and financing; what principles should govern use of the Fund’s resources; how international liquidity should be managed; what action should be taken with respect to SDRs; and the particularly difficult question of what rules should govern exchange rates.

The second task of the Committee is “dealing with sudden disturbances that might threaten the system.” This responsibility was included at the insistence of many Fund members that did not belong to the influential Group of Ten. From 1968 to 1973, as the Bretton Woods system of adjustable par values was collapsing, the international monetary system underwent frequent crises. These became the occasion for decisions by the Group of Ten. Fund members that were not part of the Group resented being excluded from participation in these decisions; hence, they wanted a broader forum than the Group of Ten to consider responses to any future crises in the international monetary system.

Work related to the third area of responsibility of the Interim Committee, “considering proposals by the Executive Directors to amend the Fund’s Articles of Agreement,” has been completed. When the Committee was established in 1974, the Executive Board had already taken on the task of drafting the Second Amendment. The Committee’s role in this process was completed at its fifth meeting in January 1976 in Jamaica, when agreement was reached on what is now often referred to as the Jamaica accord. At that time a number of long-standing contentious issues were finally resolved, including the hotly debated issue of whether the amended Articles would legitimize floating exchange rates. The Committee endorsed the new Article IV, which permitted floating rates, and agreed on a number of long-debated provisions concerning gold. In the view of many observers, the Jamaica accord was indicative of how well and how quickly after its creation the Interim Committee could function.

In addition to these specific responsibilities, the Committee is to “advise and report to the Board of Governors on any other matters on which the Board of Governors may seek the advice of the Committee.”

Meetings of the Committee are usually held twice a year. Most meetings have been held in Washington, but in earlier years some were held in other cities, including Paris, Kingston, Mexico City, Hamburg, and Libreville.1 For each meeting, a draft agenda is prepared by the Managing Director and discussed by the Executive Board. The agenda is then agreed upon with the Chairman of the Committee. For each substantive item on the agenda there is a report of either the Executive Board or the Managing Director. Thus the Executive Board, with the assistance of the staff, prepares detailed material, often with suggestions and recommendations, for the Committee to consider.

At the Committee’s meetings, the Managing Director usually introduces each substantive item on the agenda, shares the rostrum with the Chairman at all times, and takes an active role in the proceedings. All members of the Committee tend to speak in turn on important items, and lively interchanges often occur. When matters of unusual sensitivity have been discussed or when impasses have been reached after discussion, members of the Committee and the Managing Director will often get together in restricted sessions—sometimes formally and sometimes informally, such as at lunch or dinner. After each Interim Committee meeting, the Committee issues a communiqué describing its discussions and summarizing its recommendations.

From the beginning, the Committee has followed the practice of selecting a Chairman from among its members. From 1974 to 1985, eight individuals were named to the post: John N. Turner, Minister of Finance of Canada; Willy De Clercq, Minister of Finance of Belgium (twice); Denis W. Healey, Chancellor of the Exchequer of the United Kingdom; Filippo Maria Pandolfi, Minister of the Treasury of Italy; Rene Monoroy, Minister of Economy of France, Allan J. MacEachen, Deputy Prime Minister and Minister of Finance of Canada; Sir Geoffrey Howe, Chancellor of the Exchequer of the United Kingdom; and H.O. Ruding, Finance Minister of the Netherlands. Mr. Monoroy never presided over a meeting, and Hannes Androsch (Austria) presided over the meeting in September 1980 in the absence of Mr. Pandolfi.

ACCOMPLISHMENTS

The work of the Interim Committee from 1974 to 1985, apart from its actions in regard to the Second Amendment, can be summarized under five main categories.

1. Economic Policy. A major part of nearly all of the Committee’s meetings has been discussion of the world economic outlook and the appropriate policy responses. After this discussion, the Committee has customarily prescribed detailed, specific, and frank recommendations on the policies members should pursue in the interest of the international community at large. For example, in 1979, with a new upsurge in inflation in industrial countries, the Committee took the position that elimination of inflation ought to be given top priority, as a prerequisite to stimulating world economic growth. In the next three years, despite rising unemployment in most industrial countries and the onset of the deepest worldwide recession since World War II, the Committee consistently urged industrial countries to continue their policies of monetary and fiscal restraint as a basis for eventual sustainable economic growth.

In October 1984, the Committee expressed satisfaction with the recovery of economic growth in the industrial world but voiced deep concern with the continued difficult position of many developing countries, including their serious external debt problems, recognizing that a number of unusually adverse outside developments in the world economy contributed to developing countries’ problems.2 At that time, the Committee also agreed that a medium-term strategy by industrial countries was appropriate to sustain world recovery. Such a strategy would involve, in particular, disinflationary monetary policies and further action to improve the structure of government budgets and reduce deficits, primarily through reduced spending. It would also involve a determined attack on structural rigidities in the industrial countries, including protectionist measures, that impede the efficient functioning of markets. Regarding the developing countries, the Committee noted the progress that had been made with a coordinated adjustment and financing strategy in tackling the external debt problem, and it stressed the importance of a continuing Fund role in implementing this strategy.

At its unusually long three-day meeting in April 1985, while noting that the recovery, though so far geographically uneven, was expected to be sustained, the Committee drew attention to continuing problems in the world economy: the momentum of growth in many developing countries had not yet achieved “an acceptable pace” their commodity prices and terms of trade had not recovered from the 1981–82 recession; fiscal and current account imbalances in some industrial countries had continued and intensified; unemployment had remained very high in many countries; and exchange rate volatility had persisted.3

At its October 6–7, 1985 meeting, in Seoul, the Interim Committee noted progress on a number of fronts in the world economic situation but, nonetheless, also drew attention to the persisting problems, many of which were the same problems of six months earlier. By October, moreover, a renewed emphasis on the need for greater economic growth in the world economy, generally, and in the developing debtor countries, in particular, dominated the Committee’s meeting. For the first time since the debt crisis began in late 1982, the communique issued after the meeting used such significant phrases as “actions that would enhance prospects for durable growth” and “a return to a higher and sustainable rate of growth in the indebted countries, which was essential to make debt servicing more manageable.”4

2. Use of Fund Resources. At several of its meetings in the last 11 years, the Interim Committee has considered the Fund’s policies on use of its resources and has supported a number of developments: the renewal and improvement of the oil facility for 1975, the improvement of the compensatory financing and buffer stock financing policies, the design and creation of the supplementary financing facility, the increasing from eight to ten years of the maximum repurchase period for drawings under the extended facility, the adoption of the cereal facility, and the establishment of a subsidy account for the supplementary financing facility to reduce borrowing costs for low-income members.

From March 1981 onward, the Fund has been guided by the policy on enlarged access to use of its resources, under which the institution provides assistance to members facing external payments imbalances that are large in relation to their quotas. In 1981, the Interim Committee noted “with satisfaction” the decision of the Executive Board establishing this enlarged access policy and supported other developments placing the Fund in a better position to provide financial assistance to its members to facilitate balance of payments adjustment. Thereafter, the Committee has made a number of recommendations regarding the enlarged access policy. In October 1983, for instance, it concluded that the policy, which is of a temporary character, should continue in 1984 in accordance with several specific access limits. It also decided that the policy should be reviewed yearly to consider its extension, its gradual phasedown, or its termination. In October 1984, the Committee agreed that the enlarged access policy would continue through 1985, with slightly reduced access limits. The use of Fund resources in 1985 was to be subject to annual limits of 95 or 115 percent of quota (down from 102 percent of quota in 1984, or 125 percent in exceptional cases), three-year limits of 280 or 345 percent of quota (down from 306 or 375 percent in 1984), and cumulative limits of 408 or 450 percent of quota, depending on the seriousness of the member’s balance of payments difficulty and the strength of its adjustment effort.

In April 1985, the Committee asked the Executive Board to consider assisting adjustment in low-income developing members by using resources made available by the repayment of loans made earlier by the Trust Fund. In October 1985 the Committee discussed use of the Fund’s resources at some length. It agreed on slightly lowerlimits for access under the enlarged access policy in 1986: annuallimits were set at 90 or 110 percent of quota, three-year limits at 270 or 330 percent of quota, and cumulative limits at 400 or 440 percent of quota. The Committee also came to several conclusions on the use of resources that would become available over the period 1985–91 as a result of repayments of loans made by the Trust Fund. These resources, expected to total about SDR 2.7 billion, should be used to provide additional balance of payments assistance on concessional terms to those low-income members who are eligible for InternationalDevelopment Association (IDA) resources and who are in need of such assistance. (The Committee welcomed statements by China and India that they would not avail themselves of this facility.) A further conclusion was that this assistance should also be made available to members implementing economic programs designed to promote structural adjustment and growth in a medium-term framework. In this connection especially, the Fund was to work closely with the World Bank. Another conclusion was that the terms of the use of the resources, such as the rate of interest and the period of repayment, should be similar to those which had applied earlier to loans from the Trust Fund.

3. Quota Reviews. The Interim Committee’s meetings in earlier years also greatly facilitated agreement on the Sixth, Seventh, and Eighth General Review of [Fund] Quotas. These reviews gave rise to several complex issues, such as the total size of increased quotas, the distribution of the increases among members, and the form in which subscriptions for the increases were to be paid. In every case the Committee was able to reach agreement. For example, at its February 1983 meeting, when the Eighth General Review of Quotas was in the forefront of the Executive Board’s attention, the Committee agreed on the following points:

  • that total quotas should be increased from SDR 61 billion to SDR 90 million,

  • that 40 percent of the overall increase should be distributed to all members in proportion to their existing individual quotas, with the balance of 60 percent to be distributed in the form of selective adjustments in proportion to each member’s share in the total of the calculated quotas (that is, the quotas that broadly reflect members’ relative positions in the world economy), and

  • that 25 percent of the increase in each member’s quota should be paid in SDRs or in usable currencies of other members.

The Committee, moreover, encouraged and endorsed the efforts of the Managing Director to obtain additional money by borrowing from official sources.

4. Surveillance. On several occasions the Interim Committee has stated its position on the exercise by the Fund of its powers of surveillance over members’ balance of payments adjustment and exchange rate policies. In recent years, it has stressed the need for the Fund to implement its surveillance authority effectively, in a uniform and symmetrical manner for all members. For example, in April 1985, pointing out the importance of effective Fund surveillance as a means of promoting sound underlying economic policies and the convergence of economic performance among Fund members, the Committee urged the strengthening of Fund surveillance over the policies of all members.

The Committee has also endorsed the increased attention devoted to the problem of protectionism in the Fund’s surveillance activities. For example, in October 1985 in Seoul all members of the Committee agreed that protectionism constitutes a “major threat.” They stressed that unless governments refrained from protectionist measures, the prospects for sustainable recovery in the world economy would be undermined and the management of the external position of heavily indebted countries would be severely complicated. The Committee noted, too, that pressure in industrial countries to increase protection also made more difficult the task of countries that were taking steps to reduce restrictions and open their markets. In this regard, the members of the Committee explicitly expressed the firm determination of their governments to preserve an open trading system in which all countries would have effective access to world markets. The Committee also noted with satisfaction the positive development of discussions within the General Agreement on Tariffs and Trade (GATT) with a view to opening a new trade round.

5. SDRs. Since 1974, the Interim Committee has also reached several understandings with regard to the Fund-created reserve asset, the SDR. In earlier years, understandings provided for the resumption of allocations of SDRs, an increase in the rate of interest on holdings of SDRs, and a reduction in the obligation to reconstitute holdings of SDRs.

In October 1984, the Committee considered again the question of an SDR allocation. Most committee members reiterated their firm view that an allocation of SDRs would strengthen the world economy and the international monetary system. Some members of the Committee, however, continued to feel that the existence of a global liquidity shortage had not been demonstrated and that the problems faced by some countries with inadequate reserves should be met through adjustment in economic policies and the provision of conditional financing. It was clear from the Committee’s deliberations that there was not the broad support necessary to resume allocations of SDRs.

Once more, in October 1985 the Committee had a brief discussion of the question of an SDR allocation in the current basic period. This discussion confirmed that there was no change in the positions of committee members on this subject and that, therefore, the degree of required support for such an allocation was still lacking. The Committee reiterated that the SDR constitutes an integral part of the structure of the Fund and agreed to consider the matter of allocations again at its next meeting, scheduled for April 9–10, 1986, in Washington. The Committee also urged the Executive Board to pursue its planned review on the role of the SDR, in all its aspects, in the international monetary system as a matter of priority, and to submit to the Committee a progress report for the Committee’s consideration at its April 1986 meeting.

* * * *

All in all, the Interim Committee has become a vital part of the Fund’s policymaking process. The experience of the past 11 years indicates that the Committee provides political leadership to the Fund. As it was intended to do, it gives guidance to the Board of Governors to enable that body to take action on a number of complex questions for which it has responsibility. In this way, the Board of Governors, which is much too large a body to hold detailed or frequent deliberations, has been able to function effectively in a difficult period. Indeed, it is in order to assist the Board of Governors that one of the two yearly meetings of the Interim Committee customarily immediately precedes the Annual Meeting of the Governors. In addition, the work of the Interim Committee greatly facilitates and expedites the day-to-day work of the Executive Board and of the Fund’s management and staff by providing regular guidance on the issues being considered in the Executive Board.

Principal Interim Committee Meetings, 1974–85
DateLocationPresiding
1974October 3WashingtonJohn N. Turner
1975January 15–16WashingtonJohn N. Turner
June 10–11ParisJohn N. Turner
August 31WashingtonJohn N. Turner
1976January 7–8KingstonWilly De Clercq
October 2ManilaWilly De Clercq
1977April 28–29WashingtonWilly De Clercq
September 24WashingtonDenis Healey
1978April 29–30Mexico CityDenis Healey
September 24WashingtonDenis Healey
1979March 7WashingtonDenis Healey
October 1BelgradeFilippo Maria Pandolfi
1980April 25HamburgFilippo Maria Pandolfi
September 28WashingtonHannes Androsch
1981May 21LibrevilleAllan J. MacEachen
September 26–27WashingtonAllan J. MacEachen
1982May 12–13HelsinkiAllan J. MacEachen
September 4TorontoAllan J. MacEachen
1983February 10–11WashingtonSir Geoffrey Howe
September 25WashingtonWilly De Clercq
1984April 12WashingtonWilly De Clercq
September 22WashingtonWilly De Clercq
1985April 17–19WashingtonH.O. Ruding
October 6–7SeoulH.O. Ruding

Chronology, 1972–78

1972
January 1The third and final allocation of SDRs (SDR 2.95 billion) for the first basic period was made.
February 25The Executive Board recommended to the Board of Governors that the Fund express its accounts in terms of SDRs instead of U.S. dollars, and on March 20, 1972 the Board of Governors approved the recommendation.
April 24The narrow margins agreement of the European Community (EC), “the snake in the tunnel,” entered into force; the margin of fluctuation between the six currencies involved was not to be permitted to exceed 2¼ percent, half the margin permitted under the Fund’s temporary regime of central rates and wider margins.
May 8A new par value for the U.S. dollar—a devaluation of 7.89 percent in terms of gold as agreed upon at the Smithsonian Institution in December 1971—went into effect.
June 23Sterling floated—the first break in the “Smithsonian rates.”
July 26The Board of Governors adopted a resolution establishing an “ad hoc Committee of the Board of Governors on Reform of the International Monetary System and Related Issues” (the Committee of Twenty) to negotiate a reformed international monetary system.
September 6The Executive Board published a report, Reform of the International Monetary System, identifying major issues for further study and discussion.
September 28The Committee of Twenty held its inaugural meeting, setting a goal of two years to complete its work.
1973
January 1A second SDR period began, an “empty” period, in which no SDRs were allocated.
January 22–23Further breaks in the Smithsonian rates occurred as Italy introduced a free market for capital transactions and the Swiss franc floated.
March 19After further turbulence in exchange markets beginning on March 2 which triggered several joint emergency meetings of the Group of Ten and officials of the EC, and which Mr. Schweitzer also attended, the EC countries introduced a joint float for their currencies against the U.S. dollar. This marked the beginning of “generalized floating.”
March 22–27In light of the new emergency, the Deputies of the Committee of Twenty decided to proceed urgently with the drafting of an outline of the reformed system. The Committee of Twenty reiterated its preference for a new exchange rate regime in a reformed system based on “stable but adjustable par values” and supported the decision of the Deputies to draft an Outline of Reform.
May 21–July 31The Deputies of the Committee drafted an Outline of Reform and, as the Committee of Twenty held its third meeting, optimism increased that agreement on a reformed system might be reached.
September 1H. Johannes Witteveen of the Netherlands became the fifth Managing Director of the Fund, succeeding Pierre-Paul Schweitzer, who had served from September 1, 1963 to August 31, 1973.
September 5–24The Deputies of the Committee of Twenty, meeting in Paris, failed to agree on compromise arrangements for a reformed system and it was evident when the Committee of Twenty met in Nairobi at the time of the Annual Meetings that it would be unable to reach agreement on a reformed system.
October 10–17Six members of the Organization of Petroleum Exporting Countries (OPEC), for the first time, unilaterally set new posted prices for crude oil. The new marker price for Saudi Arabian crude oil was raised from $3.01 to $5.12 a barrel, a 70 percent rise.
October 31The Fund introduced special consultations with members whose external policies were of major international importance, to be held in conjunction with the world economic outlook exercise.
November 12The seven former participants in the Gold Pool terminated their agreement of March 1968 that prevented them from selling gold on the free market. Central banks could now sell gold at market prices.
December 23Six oil exporting countries once more announced large increases in the prices of crude oil, thus nearly quadrupling prices since the beginning of October.
1974
January 3As members faced unprecedently large balance of payments deficits as a result of the large rise in oil prices, Mr. Witteveen proposed establishment of a temporary oil facility in the Fund.
January 17–18The Committee of Twenty, meeting in Rome, gave up efforts for full-scale reform of the international monetary system and decided to let a new system evolve out of existing arrangements.
March 1William B. Dale, U.S. Executive Director since 1962, was appointed the fourth Deputy Managing Director following the retirement of Frank A. Southard, Jr.
April 10The Fund approved a one-year stand-by arrangement for SDR 1,000 million, in the upper credit tranches, for Italy. This stand-by arrangement was the first for Italy and the largest since that approved for France in 1969.
May 7–9The Deputies of the Committee of Twenty completed the draft of the revised Outline of Reform and discussed the immediate steps needed to help a system evolve out of existing arrangements.
June 10–11The Deputies of the Committee of Twenty at their final meeting completed their work.
June 12–13At its final meeting, the Committee of Twenty agreed on several immediate steps to help the system evolve: establishment of an Interim Committee, with advisory powers, adoption of a method of valuation of the SDR based on a basket of 16 currencies and of an initial interest rate on the SDR of 5 percent, establishment of guidelines for the management of floating exchange rates, establishment of an oil facility in the Fund, provision for members to pledge themselves on a voluntary basis not to introduce or intensify restrictions, early adoption of an extended facility, and establishment of a ministerial committee to study the transfer of real resources to developing countries. The Committee agreed also on an Outline of Reform.
June 13The Executive Board adopted several decisions implementing the immediate steps agreed on by the Committee of Twenty.
July 1The Fund introduced a new method of valuing the SDR, based on a basket of the 16 currencies most used in world trade instead of on gold.
August 22Purchases began under the 1974 oil facility.
September 13The Fund established an extended facility to give medium-term assistance to developing members.
September 30Mr. Witteveen urged that another and larger oil facility for 1975 be established.
October 2The Committee of Twenty ceased to exist and the Interim Committee of the Board of Governors on the International Monetary System was established. In addition, the Joint Ministerial Committee of the Boards of Governors of the [World] Bank and the Fund on the Transfer of Real Resources to Developing Countries (the Development Committee) was established.
October 23After agreement in September by the Group of Ten to renew the General Arrangements to Borrow (GAB) for five more years, until October 23, 1980, the Executive Directors adopted a decision agreeing to renewal of the GAB; this was the third renewal.
December 23The Executive Board recommended to the Interim Committee that the Fund have an oil facility for 1975.
1975
January 15–16The Interim Committee agreed on an oil facility for 1975 larger than the one for 1974 and on establishment of a Subsidy Account to help the most seriously affected developing members defray the interest costs of using the 1975 facility. The Committee also agreed that under the Sixth General Review total quotas should be increased by 32.5 percent from SDR 29.2 billion to SDR 39 billion, with the quotas of oil exporting members as a group being doubled. The Committee also agreed on the general scope of provisions for draft amendments to the Articles and that when the Articles of Agreement were amended, the official price of gold would be abolished and that obligatory payments of gold by members to the Fund would be eliminated.
March 14The staff circulated to the Executive Directors a Comprehensive Draft Amendment that proposed pervasive modification of the Articles of Agreement. An oil facility for 1975 was established to continue until March 31, 1976, with stricter conditionality than the 1974 oil facility.
August 1A Subsidy Account to assist the Fund’s most seriously affected members to meet the cost of using the 1975 oil facility was established.
August 24The finance ministers of EC countries agreed on a common position to be taken at the forthcoming Interim Committee meeting regarding the disposition of the Fund’s gold holdings, gold trading by EC countries, and quotas under the Sixth General Review.
August 31The Interim Committee reached a consensus on arrangements for gold, agreed upon the sale of one sixth of the Fund’s gold (25 million ounces) for the benefit of developing members, the establishment of a Trust Fund, and the restitution (the return at the official price) of one sixth of the Fund’s gold to all members, and on the size of quotas for large industrial members under the Sixth General Review.
November 15–17The leaders of six major industrial countries met in Rambouillet, France, the first summit on economic topics. Following agreement between U.S. and French monetary officials settling their differences on the nature of exchange rates acceptable in amending the Fund’s Articles, the Presidents of the United States and France reached rapprochement on exchange rates, removing the last obstacle to agreement on amended Articles of Agreement for the Fund.
December 23The Executive Board agreed to the draft Article IV on exchange rate arrangements proposed jointly by the Executive Directors appointed by France and the United States.
December 24The compensatory financing facility was substantially liberalized.
December 31The Fund approved a purchase by the United Kingdom for SDR 1,000 million under the 1975 oil facility and a one-year stand-by arrangement for SDR 700 million, in the first credit tranche.
January–DecemberDrawings on the Fund in 1975 totaled SDR 4.7 billion, the largest amount ever registered in a single year.
1976
January 7–8The Interim Committee, meeting in Jamaica, completed arrangements for an “interim reform” of the international monetary system. In the Jamaica accord, which was regarded as ushering in a new “unreformed” international monetary system to be legalized in a Second Amendment of the Fund’s Articles, agreement was finally reached on the arrangements for exchange rates to be put in the amended Articles (a new Article IV), on the treatment to be given to gold, on a number of other provisions aimed at improving the operation of the General Account and the characteristics and uses of the SDR, on the establishment of a Trust Fund for developing members, and on increases for individual members’ quotas under the Sixth General Review. Because the quota increases could not become effective until the Second Amendment went into effect, the Interim Committee agreed to the temporary enlargement of access to the Fund’s resources under existing quotas, described in the entry for January 19.
January 19The Executive Board extended temporarily the size of each credit tranche by 45 percent, that is, “lending” by the Fund through its “normal channels” was enlarged by 45 percent. The action was designed mainly to enable developing members to draw more from the Fund’s regular resources before the increased quotas under the Sixth General Review went into effect.
March 24The Executive Board submitted the Proposed Second Amendment of the Articles of Agreement to the Board of Governors for approval.
April 30The Board of Governors approved the Proposed Second Amendment, which was then submitted to member countries for acceptance.
May 5After the Executive Directors agreed on the policies and procedures to be used to effect the sale of one third of the Fund’s holdings, the Fund announced a program of regular gold auctions for the next two years and established a Trust Fund.
May 30The last purchases under the oil facility took place, bringing the total to more than SDR 6.9 billion.
November 5The Executive Board decided, and the ten participants in the General Arrangements to Borrow agreed, on an increase in the amount of Japan’s credit arrangement in the GAB from ¥90 billion to ¥340 billion, thereby for the first time raising the size of the GAB, to approximately SDR 6.2 billion.
January–DecemberDrawings on the Fund in 1976 totaled SDR 7 billion, much larger even than the record amount of 1975.
1977
January 3The Executive Board approved a two-year stand-by arrangement for the United Kingdom for SDR 3,360 million, the largest amount ever approved and the first stand-by arrangement to exceed one year.
January 25The Executive Board decided that the Fund would make the first interim loan disbursements to 12 members deemed eligible to qualify for loans from the Trust Fund.
February 23The Fund completed the first of four annual restitutions of gold to its members. Just under 6 million ounces was sold at the official price of SDR 35 an ounce to 112 members in proportion to their quotas.
April 1The Executive Board increased the Fund’s charges to help bring the Fund’s income into line with its operating expenses and agreed on a formula to safeguard the Fund’s budgetary position whenever the margin between the rate of charges and the rate of remuneration became so narrow as to endanger that position.
April 25The Executive Board approved a stand-by arrangement for Italy for SDR 450 million, to continue until December 31, 1978 (a 20-month period).
April 29The Executive Board adopted a decision on the exercise of Fund surveillance of the exchange rate policies of members when the new Article IV of the proposed Second Amendment became effective.
August 6At the invitation of the Managing Director, representatives of 14 potential lenders to the Fund met in Paris to discuss amounts that they would lend for a supplementary financing facility that Mr. Witteveen was proposing and the terms and conditions on which they would make these loans to the Fund.
August 29The Executive Board adopted a decision establishing a supplementary financing facility to go into effect when loan agreements totaling not less than SDR 7.75 billion were completed.
January–DecemberDrawings on the Fund totaled just over SDR 3.4 billion, a little less than half the amount of 1976. Since there was also a record volume of repurchases, total net drawings for 1977 were only SDR 488 million.
1978
January 4–5The U.S. Treasury and the Federal Reserve Board issued a joint statement on U.S. intervention policy, as the rates for the U.S. dollar had been steadily declining since September 1977.
March 13The rates for the dollar against the deutsche mark continued to depreciate, and in a joint statement, the Finance Minister of the Federal Republic of Germany and the Secretary of the U.S. Treasury outlined cooperative measures “to counter disorderly conditions in exchange markets.”
March 31Under the Sixth General Review, 85 members, representing 78.52 percent of total Fund quotas as of February 19, 1976, consented to quota increases agreed by the Board of Governors in March 1976 and the increases went into effect.
April 1After a process lasting nearly two years, the necessary three fifths of the members representing four fifths of the total voting power accepted the Second Amendment of the Articles of Agreement.
April 29–30The Interim Committee, meeting in Mexico City, reached a consensus on a coordinated strategy to promote growth in the world economy, which had been lagging in both the industrial and developing members since 1974. The Committee failed to reach agreement on quotas under the Seventh General Review; an allocation of SDRs, establishment of a substitution account in the Fund, and the Fund’s conditionality were to be reviewed.
June 2The Executive Board began a review of the conditions associated with use of the Fund’s resources in the upper credit tranches.
June 16–17Mr. Witteveen ended his term and J. de Larosière, of France, took office as the sixth Managing Director.
July 16–17At an economic summit meeting in Bonn, the leaders of the seven major industrial nations agreed on a comprehensive strategy of mutually reinforcing action to promote world economic recovery similar to that recommended by the Interim Committee in April and the Organization for Economic Cooperation and Development in June.
September 24The Interim Committee agreed on a 50 percent increase in the overall size of members’ quotas under the Seventh General Review, which, if accepted by all members, would raise total quotas from SDR 39 billion to SDR 58.6 billion, and on an allocation of SDRs—SDR 4 billion in each of the three years, 1979, 1980, and 1981—for the third basic period.
November 1In accordance with the provision of the Articles of Agreement that a member lending certain amounts to the Fund could appoint an Executive Director, an Executive Director appointed by Saudi Arabia took a seat on the Executive Board.
December 4–5The European Council reached agreement to launch the European Monetary System on January 1, 1979.
January–DecemberDuring 1978 there was a net contraction of Fund credit as repurchases of SDR 4.9 billion exceeded total drawings of SDR 3.8 billion.

Note: This article was written as background for the Interim Committee meeting of April 17–19, 1985 and was published earlier in a slightly different form in IMF Survey (Washington), Vol. 14 (April 1, 1985), pp. 98–101. It has been updated to include the April 1985 meeting, in Washington, and that of October 6–7, 1985, in Seoul.

See list of meetings at the end of this article.

The debt problems of developing countries form the subject of Part Four.

The statement of the Committee in April 1985 with regard to the external debt problems of developing countries is described on pp. 196–97.

See also p. 197.

    Other Resources Citing This Publication