Chapter

CHAPTER 19 Charges, Repurchases, Selection of Currencies

Author(s):
International Monetary Fund
Published Date:
February 1996
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Author(s)
J. Keith Horsefield

The main lines of the fund’s policies on the use of its resources were discussed in Chapter 18; those for stand-by arrangements are dealt with in Chapters 20 and 21. Incidental references have necessarily been made already to charges on drawings and to the repurchase obligations. These subjects are more fully discussed in the present chapter, which also describes the Fund’s policy for the selection of currencies to be used in purchases and repurchases. A statistical section is appended.

CHARGES

When a member uses the resources of the Fund, it becomes subject to certain charges which are uniform for all members. These charges provide the Fund with an income. At the same time, they are designed to act as a deterrent against excessive or prolonged use of the Fund’s resources.

Nature of charges

Article V, Section 8, the relevant provisions of which are reproduced below, provides for two kinds of charges on drawings, viz.: (1) A service charge which is levied on the amount drawn without reference to the time that a drawing remains outstanding; this may be varied within narrow limits and was in fact reduced from ¾ of 1 per cent to ½ of 1 per cent in 1951. (2) Periodic charges on the Fund’s holdings of a member’s currency in excess of the member’s quota, varying with the relation of the holdings to quota and with the length of time that the drawings have been outstanding; these may also be varied, and were in fact altered in 1951, 1953, and 1963. There are supplementary provisions for the calculation of charges in Rules and Regulations I-4 and I-5.

The pertinent provisions of Article V, Section 8, are as follows:

(a) Any member buying the currency of another member from the Fund in exchange for its own currency shall pay a service charge uniform for all members of three-fourths percent in addition to the parity price. The Fund in its discretion may increase this service charge to not more than one percent or reduce it to not less than one-half percent.

(c) The Fund shall levy charges uniform for all members which shall be payable by any member on the average daily balances of its currency held by the Fund in excess of its quota. These charges shall be at the following rates:

  • (i) On amounts not more than twenty-five percent in excess of the quota: no charge for the first three months; one-half percent per annum for the next nine months; and thereafter an increase in the charge of one-half percent for each subsequent year.
  • (ii) On amounts more than twenty-five percent and not more than fifty percent in excess of the quota: an additional one-half percent for the first year; and an additional one-half percent for each subsequent year.
  • (iii) On each additional bracket of twenty-five percent in excess of the quota: an additional one-half percent for the first year; and an additional one-half percent for each subsequent year.

(d) Whenever the Fund’s holdings of a member’s currency are such that the charge applicable to any bracket for any period has reached the rate of four percent per annum, the Fund and the member shall consider means by which the Fund’s holdings of the currency can be reduced. Thereafter, the charges shall rise in accordance with the provisions of (c) above until they reach five percent and failing agreement, the Fund may then impose such charges as it deems appropriate.

(e) The rates referred to in (c) and (d) above may be changed by a three-fourths majority of the total voting power.

(f) All charges shall be paid in gold. If, however, the member’s monetary reserves are less than one-half of its quota, it shall pay in gold only that proportion of the charges due which such reserves bear to one-half of its quota, and shall pay the balance in its own currency.

In computing charges on drawings, the Fund treats reductions in its holdings of a member’s currency as canceling the portions of these holdings that have most recently accrued—i.e., those resulting from the member’s most recent drawing. The Fund thus applies the LIFO (last in, first out) principle to the calculation of charges. If it did not do this, a member that obtained a succession of drawings from the Fund could in effect acquire very cheaply a continuously revolving sum. The effect of this procedure is that charges on the portions of a member’s currency that the Fund has held longest continue to rise in accordance with the scale of charges, even though for the purpose of allocating reductions in the Fund’s holdings (to which, as mentioned in the next section of this chapter, the FIFO principle applies) those holdings are considered to have been repurchased. Not until the Fund’s holdings of a currency have been reduced to the level of the member’s quota for at least one calendar month is the progression of charges broken. Once that has been done, any subsequent drawing attracts charges at the lowest end of the scale once more.

Stand-by arrangements are not expressly provided for in the Articles, but when these are approved the Fund makes a commitment charge similar to a service charge, acting under its general powers (Article XII, Section 2 (g)). This charge (¼ per cent per annum) has to be paid in gold or U.S. dollars, except that where Article V, Section 8 (f), would permit a member to pay in its own currency part of the charges for a drawing, the commitment charge may similarly be paid partly in a member’s own currency. No commitment charge is made for such part of a stand-by arrangement as would permit the member to make drawings within the gold tranche.

Changes in charges

The charges originally imposed by the Fund were those laid down in Article V, Section 8, but on three occasions the Board has exercised its powers to alter the rates contained in this schedule. Table 16 summarizes the changes made. As a consequence of the system of progressively rising charges, there is a spread between the rate currently being paid on the Fund’s holdings resulting from any drawing and the average rate which has been paid on those holdings during the time that they have been outstanding. The lower half of the table shows the latter average (which includes the service charge) corresponding to each rate in the upper half. For example, if since May 1, 1963 the Fund’s holdings of a member’s currency have for three years been between 100 per cent and 150 per cent of the member’s quota, the charge payable will have risen to 3.5 per cent per annum on the amount drawn. The table shows that the average rate which the member will have paid during the three years was 2.5 per cent. On any part of the Fund’s holdings of the member’s currency which exceeds 150 per cent but is not over 200 per cent of the member’s quota, the corresponding figures will be 4.0 per cent and 2.83 per cent.

Table 16.Charges on the Fund’s Holdings of a Member’s Currency in Excess of the Member’s Quota Resulting from Transactions Effected
Prior to December 1, 1951From December 1, 1951 through December 31, 1953From January 1, 1954 to April 30, 1963From May 1, 1963 to December 31, 1965
Holdings Equivalent to the Following Percentages of Quota
More than100125150175100125150175100150175100150200
But not more than125150175200125150175200150175200150200
Charges in Per Cent Per Annum1
Service charge0.750.750.750.750.50.50.50.50.50.50.50.50.50.5
Duration:
0–3months0.01.01.52.00.01.01.52.00.00.00.00.00.00.0
3–60.51.01.52.00.01.01.52.02.02.02.02.02.02.0
6–120.51.01.52.01.01.52.02.52.02.02.52.02.02.5
1–1 ½years1.01.52.02.51.52.02.53.02.02.53.02.02.53.0
1½–21.01.52.02.52.02.53.03.522.53.03.52.53.03.5
2–2½1.52.02.53.02.53.03.524.03.03.54.023.03.54.02
2½–31.52.02.53.03.03.524.04.533.54.024.53.54.024.5
3–3½2.02.53.03.53.524.04.535.034.024.55.034.024.55.0
3½–42.02.53.03.54.04.535.034.535.034.55.0
4–4 ½2.53.03.54.024.535.035.035.0
4½–52.53.03.54.05.03
5–63.03.54.024.5
6–73.54.024.55.0
7–84.024.55.0
8–94.55.0
9–105.0
Average Effective Rates in Per Cent Per Annum4
Duration:
3months3.004.004.505.002.003.003.504.002.002.002.002.002.002.00
61.752.503.003.501.002.002.503.002.002.002.002.002.002.00
1year1.121.752.252.751.001.752.252.752.002.002.252.002.002.25
years1.081.672.172.671.171.832.332.832.002.172.502.002.172.50
21.061.622.122.621.382.002.503.002.122.382.752.122.382.75
1.151.702.202.701.602.202.703.202.302.603.002.302.603.00
31.211.752.252.751.832.422.923.422.502.833.252.502.833.25
1.321.862.362.862.072.643.143.642.713.073.502.713.073.50
41.411.942.442.942.312.883.382.943.312.943.31
1.532.062.563.062.563.113.173.17
51.622.152.653.152.80
61.852.382.873.38
72.092.613.113.61
82.332.843.34
92.573.08
102.81

Except for the service charge, which is payable once per transaction and is expressed as a percentage of the amount of the transaction.

Point at which consultation between the Fund and the member becomes obligatory.

Maximum charges.

Total charges payable by the member over the stated period, expressed as a percentage and divided by the number of years of the period. Includes service charge.

Except for the service charge, which is payable once per transaction and is expressed as a percentage of the amount of the transaction.

Point at which consultation between the Fund and the member becomes obligatory.

Maximum charges.

Total charges payable by the member over the stated period, expressed as a percentage and divided by the number of years of the period. Includes service charge.

The first occasion on which a change was introduced in the schedule of charges was in November 1951, as the first step toward a policy of encouraging the short-term use of the Fund’s resources. The changes made were as follows: (a) The service charge was reduced from ¾ per cent to ½ per cent, (b) The charge on the Fund’s holdings of a member’s currency lying between 100 per cent and 125 per cent of quota and maintained for between three and six months was deleted. (c) The intervals at which the charges rose by ½ of 1 per cent per annum were reduced from a year to six months, so that the charges on all other holdings maintained for periods longer than six months were increased by progressively larger amounts. (d) The point at which it becomes obligatory for the Fund and the member to discuss means of reducing the member’s outstanding drawings was lowered from that at which the charge reached 4 per cent to that at which it reached 3½ per cent. (e) The point at which charges ceased to be expressly prescribed and were left to the discretion of the Fund was put at 4 per cent, not 5 per cent. There was, however, a limit of 4V2 per cent to the rate which might be charged during the ensuing six months, and a limit of 5 per cent to the rate for the six months after that.

As will be seen from the lower half of Table 16, the effect of these changes was as follows: For a drawing which increased the Fund’s holdings of the member’s currency to not more than 125 per cent of quota, the average rate of charge was reduced if these holdings were maintained for not more than a year. For drawings in higher tranches, the average rate of charge was reduced if the Fund’s holdings were maintained for not more than six months. If the Fund’s holdings of the member’s currency remained above the member’s quota for eighteen months or longer, the average rate of charge was increased. This effect was designed: it was related to the Managing Director’s wish to encourage small and ultra short-term drawings, and to discourage long-term drawings. Moreover, the shortening of the period before the member was required to consult the Fund about ways of reducing the Fund’s holdings of its currency was deliberately intended to ensure that repurchases were made sooner than was implicit in the schedule adopted at Bretton Woods.

In accordance with the requirements of Article V, Section 8 (e), the minute recording the foregoing decision noted that a vote was taken. The decision was supported unanimously by the Directors present at the meeting, who cast 78,455 votes out of a possible maximum for the whole Board of 91,115 votes. Similar votes were taken on the occasion of all the later changes noted below.

The decision taken in November 1951 determined the new schedule only for the period ending December 31, 1952. In November 1952 its currency was extended to June 30, 1953; in June 1953 it was further extended to the end of October 1953; and in October it was again extended to December 31, 1953.

The reason for these piecemeal prolongations was that some Executive Directors, and notably Mr. Southard (United States), were dissatisfied with the schedule but were unable to reach agreement with their colleagues on a new set of charges. Some Directors believed that the charges were too high. The U.S. view was that the rate of charge arranged in 1951 on drawings which raised the Fund’s holdings of the member’s currency to 125 per cent of quota was too low, but that some reduction would be practicable in charges on drawings in higher tranches. Eventually, after negotiations lasting several months, Mr. Southard proposed to the Board a new scale which represented a compromise between the views of his Government and those of other members. The principal feature of his proposal was the abandonment of a separate rate of charge for holdings in the 100–125 per cent bracket, and the application to such holdings of the charge on holdings in the 125–150 per cent bracket. Another change was the abandonment of any charge except the service charge on holdings maintained for not more than three months; this overcame the difficulty that under the earlier scales the annual rate of charge (including the service charge) was greater on holdings maintained for not more than three months than on holdings maintained for substantially longer periods. At the same time, the point of time at which a member was required to consult the Fund about ways to reduce the Fund’s holdings of its currency was left unaltered. Because charges had risen, this point again became that at which the rate of charge reached 4 per cent. The new scale was approved on December 23, 1953, to be applied to drawings on or after January 1, 1954.

The discussion of Mr. Southard’s proposal raised a question which was subsequently to feature in most discussions of charges: Should the rates take account of the rates of interest ruling in the world’s principal money markets? Executive Directors’ views on the point have continued to differ, and the lack of unanimity has contributed to the subsequent stability of charges. While the schedule of rates has been reviewed annually since 1954, the only change introduced has been necessitated by the emergence of a new factor. This was the decision that a drawing under the compensatory financing plan might be permitted to increase the Fund’s holdings of a member’s currency beyond 200 per cent of quota,1 whereas the scale previously in force made no provision for such drawings.

The staff recommended in April 1963 that for the future the charges applicable to holdings in the 175–200 per cent bracket should be applied to drawings which raised the Fund’s holdings above 200 per cent of quota. Drawings which raised the Fund’s holdings to between 175 per cent and 200 per cent of quota should in future attract the rate charged in the next lower bracket (150–175 per cent of quota). One argument for the proposal not to charge more on holdings above 200 per cent of quota than had previously been charged on holdings in the 175–200 per cent bracket was that under the previous scale the point at which the Fund and the member had to discuss ways to reduce the Fund’s holdings of the member’s currency was reached after only two years; there seemed to be no point in setting rates of charge which would shorten even more the time before such discussions became obligatory. The Board approved the proposal, with effect from May 1, 1963.

It will be observed that the maximum rate of charge shown in Table 16 is 5 per cent per annum. This would be reached, for drawings effected after January 1, 1954, one year after the point at which the Fund and the member were required to enter into discussions. Neither Article V, Section 8, nor the relevant Rule prescribed what rate of charge was to be levied on drawings held still longer. This deficiency was remedied in two stages.

In April 1959 the Board decided that if the member agreed with the Fund on a schedule which would complete repurchases within five years of the date of a drawing, the maximum rate of charge should be 5 per cent. If agreement on a schedule was reached, but repurchases under this schedule would not extinguish the drawing within the five years, the Fund might adopt higher maximum rates. If no agreement was reached with the member at all, the Fund might impose such charges as it deemed appropriate, after the 5 per cent rate had been reached.

Four years later the question of such charges became an imminent one, as Cuba had failed to agree on a schedule of repurchases which would extinguish a drawing which it had had five years earlier. The staff then proposed that so long as a member in Cuba’s position failed to reach an agreement, the charge should continue to rise by ½ of 1 per cent each six months; but it also suggested that the Board might wish to consider imposing a maximum rate of charge. The staff also proposed a procedure to deal with the case, hitherto unprovided for, of a member that agreed to a schedule which would complete repurchase within five years, but failed to keep the agreement. The staff suggested that for such a member the rate of charge should rise to 5½ per cent six months after it had reached 5 per cent, and thereafter increase by ½ of 1 per cent each six months; except that if the member broke the agreement at a time when it had already been paying 5 per cent for more than six months, the rate should rise to 5½ per cent immediately. These recommendations were approved when they came before the Board, and at the instance of Mr. Saad (United Arab Republic) provision was made for reviewing the rate of charge when this had reached 6 per cent.

Also in 1959 a change was made in the rules governing the commitment charge on stand-by arrangements, as a result of which it was made payable in advance but became available to be offset against the service charge on any drawing made while the stand-by arrangement was in force.2 (Previously the commitment charge had been payable in half-yearly installments, and that for the second half of a year had not been available to be offset against a drawing in the first half of the year.) At the same time, appropriate arrangements were made to cover such complications as arose if a member (a) made a drawing under a stand-by arrangement, as a result of which it was credited with a proportionate part of the commitment charge, (b) subsequently repurchased all or part of the drawing, and (c) wished to reconstitute a commensurate part of the drawing rights conferred by the stand-by arrangement. It was also decided that when a member canceled a stand-by arrangement it should be entitled to a refund of the commitment charge proportionate to the unexpired period of the arrangement in respect of the part of the drawing rights under the arrangement (if any) which could still be drawn when the arrangement was canceled, and in respect of which the member had paid a charge.

The reason for the final clause of the last-mentioned decision was that commitment charges are not levied in respect of such part of a stand-by arrangement as covers the member’s gold tranche. In the same decision, the Board agreed that where the Fund’s holdings of the currency of a member that had a stand-by arrangement were reduced, so that the excess of these holdings over the member’s quota was less than the undrawn amount of the stand-by arrangement, the commitment fee would be pro rata refunded. Three years later, this was modified to exclude changes in the Fund’s holdings of a member’s currency in a special account for administrative expenditures, provided that these did not exceed 1/100 of 1 per cent of the member’s quota.3 This avoided trifling refunds which became due if the Fund or a member made a small payment (e.g., for a book) at a time when the member had a stand-by arrangement straddling its quota.

REPURCHASES4

Provisions in Articles of Agreement

The provisions in the Articles of Agreement that relate to repurchases may be divided into six categories, as follows:

(1) Provision for the automatic repurchase of the Fund’s holdings of the member’s currency in excess of 75 per cent of its quota (Article V, Section 7 (b) (i)).

(2) Provision for the automatic repurchase of additional segments of the Fund’s holdings in excess of 75 per cent of the member’s quota, in particular circumstances (Article V, Section 7 (b) (ii)).

(3) Limitations on the foregoing (Article V, Section 7 (c)).

(4) Detailed provisions for identifying the particular currencies, or gold, to be used for obligatory repurchases (Schedule B).

(5) Provisions for voluntary repurchases of the Fund’s holdings in excess of the member’s quota (Article V, Section 7 (a)).

(6) Provision for the emergency suspension of all the foregoing (Article XVI, Section 1).

The full text of Article V, Section 7, is as follows:

Repurchase by a member of its currency held by the Fund.—(a) A member may repurchase from the Fund and the Fund shall sell for gold any part of the Fund’s holdings of its currency in excess of its quota.

(b) At the end of each financial year of the Fund, a member shall repurchase from the Fund with gold or convertible currencies, as determined in accordance with Schedule B, part of the Fund’s holdings of its currency under the following conditions:

  • (i) Each member shall use in repurchases of its own currency from the Fund an amount of its monetary reserves equal in value to one-half of any increase that has occurred during the year in the Fund’s holdings of its currency plus one-half of any increase, or minus one-half of any decrease, that has occurred during the year in the member’s monetary reserves. This rule shall not apply when a member’s monetary reserves have decreased during the year by more than the Fund’s holdings of its currency have increased.
  • (ii) If after the repurchase described in (i) above (if required) has been made, a member’s holdings of another member’s currency (or of gold acquired from that member) are found to have increased by reason of transactions in terms of that currency with other members or persons in their territories, the member whose holdings of such currency (or gold) have thus increased shall use the increase to repurchase its own currency from the Fund.

(c) None of the adjustments described in (b) above shall be carried to a point at which

  • (i) the member’s monetary reserves are below its quota, or
  • (ii) the Fund’s holdings of its currency are below seventy-five percent of its quota, or
  • (iii) the Fund’s holdings of any currency required to be used are above seventy-five percent of the quota of the member concerned.

The provisions of Article V, Section 7 (b) (ii), which were intended to deal with the case of a member building up reserves in a reserve currency by operations in that currency in a third country, have proved impracticable and have never been applied by the Fund.

The principal provisions of Schedule B are as follows:

1 (a). If the member’s monetary reserves have not increased during the year, the amount payable to the Fund shall be distributed among all types of reserves in proportion to the member’s holdings thereof at the end of the year.

1 (b). If the member’s monetary reserves have increased during the year, a part of the amount payable to the Fund equal to one-half of the increase shall be distributed among those types of reserves which have increased in proportion to the amount by which each of them has increased. The remainder of the sum payable to the Fund shall be distributed among all types of reserves in proportion to the member’s remaining holdings thereof.

1 (c). If after all the repurchases required under Article V, Section 7 (b), had been made, the result would exceed any of the limits specified in Article V, Section 7 (c), the Fund shall require such repurchases to be made by the members proportionately in such manner that the limits will not be exceeded.

3. … No account shall be taken … of any increase in [a member’s] monetary reserves which is due to currency previously inconvertible having become convertible during the year; or to holdings which are the proceeds of a long-term or medium-term loan contracted during the year; or to holdings which have been transferred or set aside for repayment of a loan during the subsequent year.

The principal elements in the definition of monetary reserves, which is of course basic to the calculations needed to assess repurchase obligations, are as follows:

A member’s monetary reserves means its net official holdings of gold, of convertible currencies of other members, and of the currencies of such nonmembers as the Fund may specify. (Article XIX (a)) [Note: The Fund has never “specified” any non-member currency.]

A member’s monetary reserves shall be calculated by deducting from its central holdings the currency liabilities to the Treasuries, central banks, stabilization funds, or similar fiscal agencies of other members … together with similar liabilities to other official institutions and other banks in the territories of members… . (Article XIX (e))

Interpretative decisions

In the early days of the Fund’s work the calculation of members’ monetary reserves gave rise to a large number of problems, and various decisions were taken which generalized the answers given.5 For our purposes the following are the most important of these decisions.6

Timing of repurchase obligations

Three questions concerning the application of time limits to the calculation of monetary reserves, and hence of repurchase obligations, have been decided by the Board. The first one dealt with the question when the initial calculation of monetary reserves was to be made. The Board decided that

for the purpose of the repurchase obligations prescribed by Article V, Section 7, increases and decreases in the monetary reserves of a member shall not be considered if they occur on or before the latest date on which the member’s subscription must be paid …; and the payment of subscriptions, whether actually made before or after such latest date for payment, shall not be regarded as resulting in a decrease in monetary reserves.7

The second decision settled at what point of time the decrease in monetary reserves resulting from a repurchase would be deemed to take effect for the purpose of the next calculation under this provision:

Whenever a member uses its monetary reserves to repurchase its currency from the Fund in accordance with the provisions of Article V, Section 7 (b) (i) or (ii), the resulting reduction in its monetary reserves and in the Fund’s holdings of its currency must be regarded as having occurred, for the purpose of calculating subsequent repurchase obligations under the same provisions of the Fund Agreement, at the end of the financial year of the Fund in respect of which the obligation to make the repurchase arose.8

The third decision determined the point of time at which the limits set out in Article V, Section 7 (c), were to be regarded as applying:

In the application of the repurchase obligations of the Fund Agreement the limits specified in Article V, Section 7 (c), apply solely as of the end of the financial year for which the repurchase obligations are calculated.9

Abatement of repurchase obligations

The Board considered in 1950 what should be done when a repurchase obligation calculated in accordance with Article V, Section 7, and Schedule B included an amount of a currency which the Fund could not accept because of the terms of Article V, Section 7 (c) (iii), and decided as follows:

If part of a member’s gross repurchase obligation for any financial year is allocated to a currency which the Fund cannot accept because of Article V, Section 7 (c) (iii), that part of the gross obligation is abated for that year under Schedule B, Paragraph 1 (c), and is not required to be discharged in gold or some other currency.10

Voluntary repurchases

On several occasions the question has arisen whether the Fund might accept a voluntary repurchase. Provision was made in Article V, Section 7 (a), for a member wishing to repurchase from the Fund the Fund’s holdings of its currency in excess of its quota. However, a difficulty arose (as explained below) in connection with other repurchases that were neither (1) required by Article V, Section 7 (b), nor (2) arranged following consultations prescribed by Article V, Section 8 (d), nor (3) made in pursuance of an undertaking given at the time of a drawing (e.g., under a stand-by arrangement or in consideration of the Board’s waiving the limits set out in Article V, Section 3 (a)).

The decision eventually reached was as follows:

(1) Subject to paragraph 3 below, a member may offer in voluntary repurchase, and the Fund has the power to accept, if it so decides, gold or convertible currencies to the extent that (a) the Fund’s holdings of the convertible currency of a member which is offered would not be increased above 75% of the quota of that member, and (b) the Fund’s holdings of the repurchasing member’s currency would not be decreased below 75% of its quota.

(2) As a matter of legal interpretation it is determined that the consent of the member whose currency is offered in voluntary repurchase is not necessary as a condition precedent to the acceptance by the Fund of such currency.

(3) Where a member has an accrued and undischarged repurchase obligation under Art. V, Sec. 7 (b), and Schedule B in respect of any financial year of the Fund, the member must discharge the obligation in accordance with those provisions; provided, however, that the payment of currency under those provisions may be combined with the sale of gold to the Fund for the currency under Art. V, Sec. 6 (a).11

Collection of monetary reserves data

The information needed to calculate repurchase obligations under Article V, Section 7, consists of figures for the member’s monetary reserves, as defined in the Articles and in the Board’s decisions, together with the Fund’s holdings of the members’ currencies. The latter data are, of course, in the Fund’s possession, but for the former it is dependent upon reports from the members. The original Rules and Regulations provided (Rule I-6) that each member should furnish to the Fund the necessary data about its monetary reserves “at the end of each financial year.” At first, however, it proved difficult to secure the data, and in July 1950 the Board altered the Rule to require the provision of the information within six months of the end of each financial year. Despite this, the staff had to report in November 1950 that, out of the 49 members of the Fund at that time, 20 had failed to provide information about their monetary reserves as at April 30, 1950, and 14 of these had also failed to provide figures for earlier years.

Thereafter matters improved, and as time went on the staff was able to make the necessary calculations with reasonable promptitude. The provisions of Article V, Section 7 (b) (i), Section 7 (c) (i), and Section 7 (c) (ii), affect only the monetary reserves of the member concerned. As soon, therefore, as data of these reserves is available, the member’s repurchase obligation, so far as it is affected by these provisions, can be calculated. Article V, Section 7 (c) (iii), introduces into the calculation a limit related to the Fund’s holdings of another member’s currency. If there is any doubt whether repurchase obligations in the aggregate exceed the amount of that currency which can be accepted within the limit, none of the calculations can be finalized until this point has been cleared up. Before 1961 this did not much matter, as only a few countries had accepted the obligations of Article VIII, Sections 2, 3, and 4 (thereby making their currencies acceptable in repurchases). Of these few, the only one in whose currency substantial repurchases became due was the United States, and the Fund’s holdings of U.S. dollars were well below 75 per cent of the U.S. quota.

In 1961 the calculations became complicated by the acceptability of a number of other currencies, but there was little doubt that the relatively small repurchase obligations accruing in them could be accepted by the Fund. By the end of 1962, however, the position had radically changed. The Fund’s holdings of U.S. dollars had risen to 74 per cent of the U.S. quota, and it would not be possible, under the limitation imposed by Article V, Section 7 (c) (iii), to accept more than US$34 million in repurchases thereafter. As repurchase obligations arising at April 30, 1963 were bound to include much more than this sum, there would have to be a scaling down of the obligations of all members who were due to repurchase their currencies with U.S. dollars. By how much each obligation would have to be scaled down, however, could not be known until all obligations had been calculated. If the Fund was to wait for six months for members to supply monetary reserves data, then make the requisite calculations, and only then notify all repurchasing members how much they were due to pay, no member would be able to make any repurchase, in respect of the year ended April 30, 1963, until late in that year. This could well have been awkward, as by that time a member’s monetary reserves might (as experience in the past had shown) have been depleted to a point at which a repurchase would be embarrassing.

The Board accordingly decided to require members to expedite the provision of monetary reserves data, taking for that purpose the following decision:

  • 1. Where on any April 30 the Fund holds a member’s currency in an amount exceeding 75 per cent of the member’s quota, the member shall make a provisional monetary reserves report to the Fund not later than May 31, preferably by cable.
  • 2. The Fund will make a provisional calculation of the amount and distribution of the repurchase obligations of such members and will inform them of the results of the calculation not later than June 15. Members shall discharge within thirty days any repurchase obligations as thus provisionally calculated and agreed with the member.
  • 3. All provisional repurchases shall be subject to adjustment by members and the Fund in accordance with Rule I-6 of the Fund’s Rules and Regulations.12

While each member of whose currency the Fund holds more than 75 per cent of its quota is thus required to supply information annually about its monetary reserves, the Board decided in 1957 that it was not necessary actually to collect repurchases if the amount involved was small. It accordingly decided:

In cases where a repurchase obligation of less than the equivalent of $500 is calculated the member will be notified, and the obligation collected, on the next occasion thereafter that a repurchase obligation accrues which, together with the first one, will total the equivalent of $500 or more.13

Limitation of repurchase obligations

Throughout the Fund’s life, repurchase obligations under Article V, Section 7, have been prevented from arising because of Section 7 (c) (ii) and have been substantially reduced by Section 7 (c) (i) and (iii). The effects of these limitations are described in the immediately following paragraphs.

The member most affected by Article V, Section 7 (c) (i), has been the United Kingdom. For instance, between April 1961 and May 1965 the United Kingdom drew over $4 billion from the Fund and repurchased $1.28 billion, but it incurred no repurchase obligation under Article V, Section 7 (b), because of the operation of Article V, Section 7 (c) (i): its monetary reserves were at all times less than its quota. In addition, the limitations contained in the last sentence of Article V, Section 7 (b) (i), and in Article V, Section 7 (c) (ii), applied at April 30, 1963 and April 30, 1964.

As regards Article V, Section 7 (c), it is convenient to consider two periods, the first comprising the twelve financial years 1948/49 through 1959/60, and the second, the six financial years 1960/61 through 1965/66. For the first twelve years it is sufficient to say that actual repurchases, which began in 1949/50, totaled $2,179 million,14 while repurchase obligations arising at April 30 in each year from 1948 to 1959 (which will normally have become payable in the ensuing fiscal year) totaled less than 60 per cent of this figure, viz., $1,235 million.15

For the six years 1960/61 through 1965/66, during which the Fund’s operations were on a much larger scale, actual repurchases totaled $4,029 million.16 But repurchase obligations accruing under Article V, Section 7 (b), totaled only 12 per cent of this sum, viz., $491 million. A total of $1,621 million did not emerge as an obligation or was abated as a result of the impact of Article V, Section 7 (c). This total was made up as follows:

  • Under Section 7 (c) (i) $198 million, affecting 11 countries
  • Under Section 7 (c) (ii) $1,106 million, affecting 20 countries
  • Under Section 7 (c) (iii) $317 million, affecting 26 countries

Of the 67 repurchase obligations, amounting to $2,112 million, which arose during the six years, 16 were affected by Section 7 (c) (i), 35 by Section 7 (c) (ii), and 55 by Section 7 (c) (iii).

The abatements under Section 7 (c) (i), representing the elimination of repurchases which otherwise would have reduced the member’s monetary reserves below its quota, largely affected Argentina, Chile, and Spain ($76 million).

Section 7 (c) (ii), which precludes repurchases which would reduce the Fund’s holdings of the repurchasing member’s currency below 75 per cent of its quota, affected principally France ($253 million). But quite substantial sums were also involved for a number of the other 19 countries concerned. The chief reason was that the members’ reserves increased so much that 50 per cent of the increase was greatly in excess of the amount needed to reduce the Fund’s holdings of their currencies to 75 per cent of their quotas.

Section 7 (c) (iii) precludes the acceptance by the Fund in repurchases of any currency of which its holdings had reached 75 per cent of the issuing member’s quota. The effect of this provision was greatly increased during the six years 1960/61 to 1965/66 by two circumstances. The first was the acceptance of the obligations of Article VIII, Sections 2, 3, and 4, by the United Kingdom and 17 other countries. The effect of this was to make their currencies available, in principle, for repurchases. However, as the Fund’s holdings were at 75 per cent or more of the British quota except between February and August 1961 and between August 1962 and April 1963, there was little scope for using sterling in repurchases, and most of the other countries’ obligations in that currency were abated, to a total equivalent to $45 million. The other factor was that the Fund’s holdings of U.S. dollars reached 75 per cent of the U.S. quota during 1963 and subsequently remained above that figure, so that the other countries’ obligations in U.S. dollars were also abated, to a total of $268 million.

Alternative repurchase procedures

In addition to the obligatory repurchases called for by Article V, Section 7 (b), and to the voluntary repurchases permitted by Article V, Section 7 (a), four other methods of repurchase have evolved: (1) repurchases called for by the Board’s decision of February 1952 (the Rooth Plan), which limits the retention of drawings to “the period reasonably related to the payments problem for which [the currency] was purchased from the Fund” and requires this period to “fall within an outside range of three to five years”; (2) repurchases of drawings under stand-by arrangements, for which the time limit is three years; (3) repurchases in accordance with a schedule agreed with the member, usually after it has been unable to repurchase within three years; and (4) voluntary repurchases.

The effect of repurchases is, of course, also achieved if other members draw from the Fund the currency of a member that has a repurchase obligation. This process has gained in importance in recent years as a result of the widening of the range of currencies drawn from the Fund—see the next section of this chapter.

Repurchases in fluctuating currencies

In September 1950 Canada abandoned the par value of the Canadian dollar, which thereafter was allowed to fluctuate. The Articles of Agreement make no provision for a fluctuating currency, so that when in 1952 Canada accepted the obligations of Article VIII, Sections 2, 3, and 4, thereby making its currency eligible for use in repurchases, it became necessary to stipulate at what exchange rate the Canadian dollar should be accepted in repurchases.

This was settled by the Board in the course of a comprehensive decision on “Transactions and Computations Involving Fluctuating Currencies” taken on June 15, 1954. The decision provided for the exchange rate for fluctuating currencies offered in repurchases to be the midpoint between the highest rate and the lowest rate for the U.S. dollar quoted, for cable transfers for spot delivery, in the main financial center of the country of the fluctuating currency, on the last business day before the Fund instructed its depository to receive the fluctuating currency.17

Voluntary repurchases

It will be recalled that the provision in the Articles of Agreement for voluntary repurchases (Article V, Section 7 (a)) relates only to repurchases of the Fund’s holdings in excess of quota, and provides for such repurchases in gold. It was for long disputed whether the Fund was entitled to accept voluntary repurchases in other circumstances. Mr. de Largentaye (France), who was the principal opponent of such voluntary repurchases, based his argument on Article V, Section 2, which reads:

  • Limitation on the Fund’s operations.—Except as otherwise provided in this Agreement, operations on the account of the Fund shall be limited to transactions for the purpose of supplying a member, on the initiative of such member, with the currency of another member in exchange for gold or for the currency of the member desiring to make the purchase.

He also objected that voluntary repurchases other than in gold, such as were in the main offered, might deprive the Fund of gold which otherwise would have had to be provided by the member in making repurchases under the terms of Article V, Section 7 (b), and Schedule B.

The Board, however, believed that it was in principle desirable to encourage voluntary repurchases, and that the correct view of the limitations set out in Article V, Section 2, did not debar such repurchases. This view, as expounded by the General Counsel in February 1950, was that the “operations” referred to in Section 2 could be simple or complex. They could, for instance, consist of a combination of a purchase of dollars from the Fund and a repurchase of the member’s currency with dollars. For if “operations” did not mean this, the Fund would be precluded from accepting any repurchase (other than under the provisions of Article V, Section 7 (b)) which would reduce the Fund’s holdings of the member’s currency below 100 per cent of quota; and this was clearly inconsistent with the emphasis in the Articles of Agreement on the desirability of the Fund’s holdings of members’ currencies being equal to 75 per cent of their quotas.

There remained the possibility that a member having an accrued obligation under Article V, Section 7 (b), might forestall the payment to the Fund of gold due under that obligation, by making a voluntary repurchase in some currency which might be of less use to the Fund. To prevent this, the Board decided—as set out in full earlier in this section—that any accrued and undischarged obligation under Article V, Section 7 (b), must be fulfilled in accordance with the stipulations of Schedule B, except that it could be paid in gold.

Ten years later the subject recurred. In November 1961 the United Kingdom made a voluntary repurchase of £100 million sterling with U.S. dollars. Mr. de Largentaye argued that the repurchase, being a voluntary one, should have been made in gold. He was answered in a memorandum from the Managing Director which pointed out that the Rooth Plan had imposed on the United Kingdom an obligation to repurchase its drawing within three to five years; that the Fund had made no stipulation at any time as to the medium in which it should be repurchased; and that therefore the United Kingdom was entitled to repurchase with any convertible currency. Article V, Section 7 (a), to which Mr. de Largentaye had referred, offered a privilege, and did not constitute a duty. When the matter came before the Board, Mr. de Largentaye’s view was not shared by other Directors, and the Managing Director’s answer was approved.

Of the total sum repurchased down to the end of 1965 (including transactions for the purpose of reducing initial currency subscriptions to 75 per cent of quota), about one eighth was voluntarily repurchased as described on page 439. A further 3½ per cent of the total sum was originally repurchased voluntarily, but was subsequently applied to extinguish liabilities arising under Article V, Section 7 (b).

Allocation of repurchases

The fact that, as mentioned above, the reductions in the Fund’s holdings of a member’s currency can be effected in a number of different ways, not all of which are related to specific drawings, makes it necessary to allocate such reductions according to fixed principles. (The need for such principles was crystallized by the obligations assumed by the Fund, under the General Arrangements to Borrow (GAB), to repay participants as members repurchased drawings for which the GAB had been activated.) The following are the principles which the Fund has adopted:

Repurchases not accruing under Article V, Section 7 (b). When such a repurchase is made, the member may specify which drawing is being repurchased; if so, its decision is accepted. If it does not specify which drawing is being repurchased, it is invited to do so. If it does not do so, the repurchase is regarded as extinguishing in whole or in part the commitment which matures first.

Repurchases accruing under Article V, Section 7 (b). Where it is practicable to identify which drawing is being repurchased, this is done (e.g., where only one drawing is outstanding in that financial year, or where several drawings are outstanding, but only one was made in the year, and the repurchase obligation arises solely because of the increase in the Fund’s holdings of the member’s currency). Where it is not possible to identify the drawing, the repurchase is regarded as relating to the drawing which matures first.

Sale by Fund of member’s currency. This is regarded as extinguishing, in whole or in part, the drawing by the member concerned that has the earliest maturity.

In effect, the arrangements ensure that the earliest drawings are normally repurchased first, in accordance with the FIFO (first in, first out) principle, in contrast to the LIFO (last in, first out) principle applied to the determination of charges. If the FIFO principle were not used in allocating reductions in holdings, a member making a series of drawings might find itself due to repurchase some of the earliest amounts all at once in order to ensure that none of them remained outstanding for longer than five years.

A related issue was discussed by the Board in 1959, when the staff brought to its notice the question of the extent to which a member could reconstitute a stand-by arrangement by repurchasing a drawing while the arrangement was in force. This feature had been introduced in the stand-by arrangement with Belgium in 195218 and implicitly approved when the Board revised the conditions for stand-by arrangements in 1953.19 Since then, members had been allowed to reconstitute stand-by arrangements that had been wholly or partially exhausted, by repurchasing not only drawings made under the stand-by arrangement but also drawings made before the arrangement began. The staff suggested that this was probably not the Board’s intention, and proposed that in the revision of conditions then in preparation this should be made clear. The Board agreed, and its decision accordingly included the following passage:

A stand-by arrangement shall provide for a fixed amount that can be purchased under it augmented by amounts equivalent to repurchases in respect of drawings made under the stand-by arrangement or made at the time when the stand-by arrangement is entered into, unless when any such repurchase is made the member informs the Fund that it does not wish the stand-by arrangement to be augmented by the amount of that repurchase.20

Effectiveness of repurchase arrangements

Since 1952 it has been the declared policy of the Fund that drawings shall be repurchased within three to five years. As with any other drawing, a member wishing to draw further before it has completed the repurchase of an existing drawing is required to justify the further drawing in accordance with the terms of the Board’s decision of February 1952. It is not surprising that there has been some increase in the total of drawings outstanding during the later years of the period covered by this volume, but it is of interest to inquire how far the repurchase requirements have succeeded in limiting the period for which members have had continuous use of the Fund’s resources. The following analysis results from such an inquiry.

During the twenty years 1946–65 there were twenty-seven members of whose currencies the Fund held more than the equivalent of 75 per cent of their quotas for more than five consecutive years. Fourteen of these, however, were members whose original gold subscriptions were less than 25 per cent of their quotas, and who took more than five years to reduce the Fund’s holdings of their currencies to 75 per cent of quota. These members, because of the relative smallness of their monetary reserves, did not incur repurchase obligations for at least a part of the time. For four other members the Fund’s holdings, while in excess of 75 per cent of quota for more than five years, did not exceed 100 per cent of quota for that length of time. Since access to drawings in the gold tranche is quasi-automatic, the position of these members scarcely gives cause for concern.

There remain nine members of whose currencies the Fund had held, during the twenty years down to December 31, 1965, more than the equivalent of 100 per cent of their quotas for more than sixty consecutive months. These members are shown in Table 17. For seven of the nine members listed, the Fund’s holdings were still in excess of 100 per cent of the member’s quota at the end of the period, indicating that, as might have been expected, the members’ difficulties were cumulative. The total amount drawn by these seven members in excess of 100 per cent of their quotas was, at December 31, 1965, $388.1 million (equal to 1.9 per cent of the aggregate of Fund quotas).

Table 17.Continuous Use of the Fund’s Resources, 1946–65
Number of Months During Which the Fund’s Holdings of

the Member’s Currency Continuously Exceeded:
Member75 per cent of quota100 per cent of quota
United Arab Republic1111106
Argentina104104
Turkey161101
Brazil120098
Yugoslavia19595
Bolivia15193
Paraguay16069
Syrian Arab Republic6767
Honduras6864

To disregard the special drawings under the arrangements for the compensatory financing of export fluctuations, granted to the United Arab Republic and Brazil, would make no difference to the table.

To disregard the special drawings under the arrangements for the compensatory financing of export fluctuations, granted to the United Arab Republic and Brazil, would make no difference to the table.

SELECTION OF CURRENCIES

Drawings in inconvertible currencies

Before 1952 the only currencies that were convertible in the Fund sense, and therefore acceptable by the Fund in repurchases, were the Cuban peso, Guatemalan quetzal, Honduran lempira, Mexican peso, Panamanian balboa, Salvadoran colon, and U.S. dollar. In 1952 the Canadian dollar was added to the list, and in 1953 the Dominican peso and the Haitian gourde. No further currencies became convertible until 1961. Of those listed, only the U.S. dollar, and to a much more limited extent the Canadian dollar, are used in international trade. In consequence, drawings down to the end of 1960 were concentrated largely on the U.S. dollar, since members did not wish to obtain a currency that was inconvertible, especially since it could not be used in repurchases. Indeed, of the currencies mentioned above, the only ones drawn at all were Canadian and U.S. dollars. This meant that the Fund’s holdings of all the other convertible currencies were consistently at or above 75 per cent of their quotas. No repurchases could therefore be made in any currencies except the two dollar currencies.

Of total drawings down to December 31, 1960 amounting to $3,683 million, 87 per cent were drawn in U.S. dollars, 8 per cent in sterling, and 3 per cent in deutsche mark; the remaining 2 per cent were divided between Belgian francs, Canadian dollars, Danish kroner, French francs, and Netherlands guilders (Table 18). Total repurchases amounted to $2,748 million, of which $628 million was repurchased with gold, $2,120 million with U.S. dollars, and $0.1 million with Canadian dollars.

Table 18.Drawings and Repurchases by Currency, 1946–65(In millions of U.S. dollars or equivalents)
CurrencyDrawn

1946–60
Drawn

1961–65
Total Drawn

1946–65
Repurchased

1946–65
Argentine pesos16.016.0
Australian pounds35.035.0
Austrian schillings73.073.011.6
Belgian francs11.4360.5371.961.8
Canadian dollars15.0474.5489.5157.8
Danish kroner0.830.030.8
Deutsche mark116.21,792.81,909.0709.8
French francs17.51,195.01,212.5267.4
Italian lire753.4753.494.1
Japanese yen241.5241.549.9
Mexican pesos9.59.5
Netherlands guilders22.5469.0491.5133.0
Spanish pesetas128.5128.5
Swedish kronor157.0157.022.5
Pounds sterling297.4353.6651.096.3
U.S. dollars3,202.81,689.34,892.13,572.0
Totals in currencies3,683.57,778.911,462.45,176.0
Repurchases in gold858.1
Total repurchases6,034.1

This heavy concentration of drawings and repurchases on one currency had not been intended by the drafters of the Articles of Agreement, who had expected that the majority of countries would accept the obligations of Article VIII, Sections 2, 3, and 4, at a fairly early stage in the Fund’s life, thereby making their currencies acceptable in repurchases once they had been drawn. On two occasions before 1961, accordingly, attempts were made to devise means by which members could be encouraged to draw inconvertible currencies.

This subject was among those remitted to the staff Working Party which was set up in November 1951 to draft the proposals for the use of the Fund’s resources which were adopted in February 1952.21 A suggestion was made to the Working Party by Sir George Bolton (United Kingdom) that the disadvantages of drawing an inconvertible currency might be overcome if two members, A and B, mutually agreed that if A drew B’s currency, B would (after a specified lapse of time) draw a corresponding amount of A’s currency, which it would sell to A for its own (B’s) currency. These arrangements would, of course, restore the Fund’s holdings of both A’s and B’s currencies to what they had been before the drawing took place; and provided that the Fund’s holdings of neither currency was, at the end of the double transaction, above 75 per cent of quota, neither would finish with a repurchase obligation (although A might have incurred one when it originally drew). Sir George’s proposal was commended to the Board by the staff, who added that it would be still more attractive to members if the arrangements, instead of being bilateral, were multilateral—though this would, of course, be much more difficult to arrange.

The staff’s recommendation was discussed in the Board on two occasions in 1952, but was not in general favorably received. Some Executive Directors suggested that drawings in inconvertible currencies were to be deprecated because a country whose currency was inconvertible was ipso facto not in a position to extend credit to others. These Directors also thought it unlikely that bilateral balances could be reversed as quickly as would be necessary to enable the drawing to be extinguished within three to five years. Some other Directors, however, welcomed the proposal, believing that some countries with inconvertible currencies could, in fact, afford to assist other members. This point was taken up especially by Mr. de Selliers (Belgium), whose country was then extending credit through the EPU to much of Europe. However, when Mr. de Selliers commended the plan from the point of view of the country with the inconvertible currency, remarking that the drawing of its currency would enable that country to come to the Fund to draw dollars, Mr. Southard objected. He said that a member acquired the right to draw a convertible currency from the Fund by virtue of having contributed gold or convertible assets to its holdings. He also argued that it was implicit in the concept of gold tranche drawings22 that they should be reversed by repurchases with convertible currencies.

The next occasion for a discussion of the possibility of making more use of inconvertible currencies in drawings arose in 1958. At the Annual Meeting in New Delhi that year the Governors had passed a resolution requesting the Executive Directors to examine the question of enlarging the resources of the Fund.23 A related issue, which the Board also examined, was whether fuller use could not be made of the resources which the Fund already possessed. To assist in the examination of this question, the staff made two suggestions. One was that the Fund should apply Article XIX (g), which reads as follows:

  • The Fund, after consultation with a member which is availing itself of the transitional arrangements under Article XIV, Section 2, may deem holdings of the currency of that member which carry specified rights of conversion into another currency or into gold to be holdings of convertible currency for the purpose of the calculation of monetary reserves.

If the Fund, using this provision, “deemed” members’ holdings of specific currencies to be convertible, these holdings could be accepted in repurchases (subject to the limits set out in Article V, Section 7 (c)).

The other suggestion by the staff was an elaboration of that made in 1952 by Sir George Bolton; it set out a series of steps by which the Fund’s holdings could be restored, after a drawing and repurchase in inconvertible currency, to exactly the same position as before the drawing.

Simultaneously, however, a further staff memorandum pointed out that in practice the use which could be made of inconvertible currencies in repurchases, even if the legal difficulties could be overcome in this way, was effectually limited by the provisions of Article V, Section 7 (c) (iii). The only inconvertible currency which could be accepted by the Fund without infringing the limits in that Section was the deutsche mark (to the extent of $66 million). The Research Department, which had written this last memorandum, suggested that the practical solution was to encourage a few members with large quotas to be ready to convert other members’ holdings of their currencies into dollars to the extent that these other members needed to make repurchases from the Fund.

While the foregoing proposals were before the Board, the major European countries announced, on December 27, 1958, that they had taken steps to establish the nonresident convertibility of their currencies. This in effect achieved what the Research Department had in mind, and it became unnecessary for the Board to consider further how to encourage the use of inconvertible currencies. The problem thus minimized vanished altogether when in February 1961 the main European countries accepted the obligations of Article VIII, Sections 2, 3, and 4.

Effects of convertibility

An analysis of drawings from the Fund during the calendar years 1961 through 1965 shows an entirely different picture from that prevailing in the years 1946–60, as described above. During the years 1961–65 only 22 per cent of drawings were taken in U.S. dollars. As will be seen from Table 18, the currency most used was the deutsche mark (23 per cent of all drawings), and there were also extensive drawings in French francs (15 per cent) and Italian lire (10 per cent). Repurchases were also widely spread.

Principles of selection

The distribution of drawings shown in Table 18 did not come about spontaneously. Because a large proportion of international trade is carried on in the reserve currencies, the currency which a member would normally need in the terms of Article V, Section 3 (a) (i), is likely to be either U.S. dollars or sterling. As soon, therefore, as the assumption of convertibility by the major European countries opened up the possibility of using other currencies for repurchases, the Managing Director represented to the Board the need to guide drawings and repurchases toward a range of currencies.

The first step was for the Legal Department to remove any doubts about the meaning of “needed for making in that currency” in Article V, Section 3 (a) (i). Its advice was that the phrase, interpreted against the background of Bretton Woods, must be taken to mean that a member was entitled to draw any currency which it could use, directly or indirectly, to support its exchange market. It could therefore draw a currency which was not a reserve currency in order to obtain for it, from the country issuing it, a reserve currency with which to settle its international accounts. This view was tacitly accepted by the Board.

A parallel memorandum prepared by the Research Department proposed a series of principles which should govern the Fund’s use of the currencies at its disposal. This concluded that the overriding concept should be that reserves should, through the Fund, flow from countries with strong balances of payments to countries with weak ones. Ideally, therefore, each member’s reserve position in the Fund (its quota less the Fund’s holdings of its currency) should move in parallel with the movements in its primary reserves. In order to influence the constitution of drawings and repurchases in this direction, the Fund should (1) ensure that future drawings were preceded by consultation as to the currencies to be drawn; (2) arrange for facilities to be available to convert currencies that were drawn into the currency directly needed by the drawing country; (3) apply the policy not necessarily to individual drawings, but in such a way as to secure the desired result from drawings in general; (4) include more currencies, rather than fewer, in any arrangements set up. At this stage the emphasis was primarily on policy with respect to drawings, and during the ensuing twelve months the members that drew from the Fund were asked to draw individual currencies in such a way as to move toward the goal outlined by the staff.

The Board returned to the subject in April 1962, and attention was then focused also on repurchases, partly as a result of Mr. de Largentaye’s protest against a voluntary repurchase by the United Kingdom in U.S. dollars.24 The staff then suggested that a reasonable starting point for future policy would be to prescribe that currencies to be used in drawings should be selected in proportion to the primary reserves of the countries whose currencies were being used, and that currencies for repurchases should be accepted proportionately to each member’s position in the Fund.

Some attention was devoted in the discussion of these proposals to the “reversal” technique, which had been suggested as a solution to the problem of directing drawings toward appropriate currencies. This technique consisted in allowing a member whose currency was drawn, if it considered that this had been done to excess, to draw in turn on the Fund, so as to offset the use of its currency. The staff deprecated this plan because of its limited usefulness. For one thing, the member that sought to draw in order to offset a drawing would itself have to make representations to the Fund within the terms of Article V, Section 3 (a), except to the limited extent that it might be able to have recourse to Article VI, Section 2.25 Also, any drawing would involve the member concerned in paying a service charge.

In the event, the Board agreed in July 1962 on a lengthy statement which included an explanation of the technique that had been adopted and an elaboration of the criteria used in the selection of currencies.26 The technique of selection, as it has since been used, may be summarized as follows:

(1) A quarterly budget of currencies to be used in purchases and to be received in repurchases is formulated as described in (5) to (10) below. The basis for this budget is a rough estimate of the requests for drawings that might be made in the coming quarter, and a forecast of the repurchase obligations which are due to be fulfilled during the quarter.

(2) The budget thus evolved is discussed by the Managing Director with the Executive Directors appointed or elected by the countries whose currencies are included in it. Subject to any modifications made as a result of these discussions, the figures are used to guide members, when drawing or repurchasing, toward the use of the listed currencies in such a manner as to approach the budget targets, taking the transactions for the period as a whole.

(3) Any drawings or repurchases that are too large to be accommodated in the budget are the subject of separate consultations with respect to the currencies to be used. For very large drawings other considerations arise—for example, it may be decided to replenish the Fund’s holdings of certain currencies by the sale of gold,27 or to activate the General Arrangements to Borrow.28 Even for these transactions, however, the principles in (5) to (10) below guide the decisions taken.

(4) For drawings that are large, but not too large to be met within the budget, a distribution of currencies is worked out individually along the same lines. Very small drawings are arranged in the reserve currency of the member drawing; this is not only operationally convenient, but makes it unnecessary for a small country to handle an unfamiliar currency. For intermediate drawings the procedure is regarded as applying to the transactions of the quarter as a whole rather than to any individual drawing; the currencies used in any one such drawing, therefore, have no great significance.

The principles which guide the selection of currencies, and the decision as to the amounts of each to be used, are as follows:

(5) A relatively short, but growing, list is maintained of countries whose balances of payments and reserves would normally permit them to see a gradual increase in their reserve positions in the Fund, and with which suitable arrangements have been worked out for conversion of amounts of their currencies when drawn. For the most part, these countries have accepted Article VIII and have reserves which exceed $500 million and (except for those of the United Kingdom) are large in relation to their quotas.

(6) On the occasion of any particular budget or large drawing, a few countries may be eliminated from this list on short-term balance of payments grounds, as indicated by the exchange rates and by changes in their reserves. Current and long-term capital accounts are watched as a check. Such countries are eliminated, however, only if they appear likely to have to draw on the Fund.

(7) As between the different currencies thus available, drawings are allocated in proportion to the size of the members’ reserves (excluding their reserve positions in the Fund).

(8) Some restraint may be imposed should the Fund’s holdings of a particular currency fall very low, but this is disregarded if it is possible to borrow that currency under the GAB.

(9) The currencies thus selected will also be available for use in repurchases, if and when the Fund’s holdings of them fall below 75 per cent of the quotas of the members issuing them, provided that these members have accepted Article VIII. The budget for repurchases allocates the aggregate commitments expected to arise during the quarter among the acceptable currencies in proportion to each member’s reserve position in the Fund.

(10) The long-term aim is to equalize the ratios between each member’s reserve position in the Fund on the one hand and its official gold and foreign exchange holdings on the other. The former quantity is defined as the gold tranche drawings which the member could make plus the amount of any indebtedness of the Fund which is readily repayable to the member under a loan agreement (including the GAB and any similar arrangement with one or more members).

U.S. technical drawings

At an early stage, the application of the foregoing procedure to repurchases came up against the difficulty that the Fund’s holdings of U.S. dollars had reached 75 per cent of the U.S. quota. When dollars thus became no longer acceptable in repurchases, countries holding dollars and needing to make repurchases could do so only by exchanging them for gold in the United States, or by purchasing with them currencies which the Fund could accept. Since these purchases would usually be those of European creditor countries, the result could be a similar drain on U.S. gold.

In these circumstances the United States offered to draw on the Fund, not for its own needs but in order to obtain a supply of currencies which the Fund could accept; these it would exchange for dollars at the request of members that had repurchases to make and wished to do so. Since currencies thus drawn by the United States would be promptly repaid to the Fund by the member making the repurchases, it was immaterial which currencies were drawn, provided that the Fund’s holdings of them were not in excess of 75 per cent of the issuing members’ quotas. The United States first drew from the Fund early in 1964, and from then until the end of 1965 it drew and made available for conversion a total equivalent to $660 million in eight different currencies. The arrangement was terminated at the end of 1966.

Replenishment

Passing reference was made above to the possibility that the Fund might acquire additional supplies of currencies needed to meet requests for drawings by replenishing its holdings of these currencies and by activating the GAB. The Fund’s powers for these purposes have been discussed in Chapter 17. Here we shall be concerned with the principles by which the Fund has selected the amounts of currencies to be acquired.

Until 1961 the only currency of which any substantial use was made was, as has been shown, the U.S. dollar. As a result of heavy drawings in 1956, the Fund’s holdings of U.S. dollars fell to $1,142 million at the end of that year, while at the same date commitments under stand-by arrangements totaled $1,117 million. The Board decided that it was desirable to replenish the holdings of dollars, and sold $300 million of gold to the United States for this purpose in January 1957. Four months later, when the Fund’s holdings of U.S. dollars had been further reduced to $977 million, and commitments under stand-by arrangements totaled $969 million, a second sale of $300 million of gold was authorized. Those were the only occasions on which the Fund has replenished its holdings of a single currency, until it borrowed Italian lire in 1966.

In August 1961 the United Kingdom came to the Fund for a drawing of $1,500 million. The Board then decided that it would replenish the Fund’s resources of each of the nine currencies being used to meet the drawing (Belgian francs, Canadian dollars, French francs, deutsche mark, Italian lire, Japanese yen, Netherlands guilders, Swedish kronor, and U.S. dollars) to the extent of one third of the use made of each. This was done by purchasing these currencies for gold.

In July 1964 the United Kingdom renewed a stand-by arrangement for $1 billion from the Fund, and within a few weeks it became apparent to the staff that a substantial drawing under that arrangement was to be expected. The Fund’s holdings of the principal continental European currencies were at a low ebb, and there would clearly have to be some reinforcement of them if the drawing was to be met without reducing the holdings to injudiciously low levels. In contrast to the situation in 1961, the GAB had become available in 1963, and during the Annual Meeting, 1964, the Managing Director discussed with the participants in the GAB the possibility of activating these Arrangements when the British request for a drawing should eventuate.

When, therefore, the United Kingdom presented its request to draw the whole amount under the stand-by arrangement late in November, a comprehensive plan was worked out, as shown in Table 19. The principal points to be noted in the table concern the proportions between the constituent columns and the totals.

Table 19.Constitution of Drawing by United Kingdom, December 1964(In millions of U.S. dollars or equivalents)
CurrenciesFrom Fund

Holdings
From

GAB
From Sales

of Gold
Total
Austrian schillings20828
Belgian francs10301757
Canadian dollars4515969
Deutsche mark18093273
French francs10063163
Italian lire155323
Japanese yen20201454
Netherlands guilders402666
Spanish pesetas301040
Swedish kronor515727
U.S. dollars200200
Total3454052501,000

(a) The proportion of the total obtained from sales of gold was one fourth. At the meeting of the Board on November 20, Mr. Garland (Australia) and Mr. Anjaria (India) questioned whether it was necessary to sell as much as $250 million of gold since, in contrast to 1961, currencies could be obtained by drawing on the GAB. The Managing Director, in reply, said that the proportion obtained by the sale of gold was a matter of judgment; he and the staff believed that one fourth was appropriate. No other Director raised the point. As between the different currencies, the amounts obtained by the sale of gold were related not to the amounts drawn on this occasion but to the cumulative total of net drawings outstanding, including those to be provided for the United Kingdom.

(b) The $750 million needed in addition to the currencies obtained by the sale of gold was apportioned among the countries whose currencies were to be drawn in a rough ratio to their holdings of gold and foreign exchange. As between the Fund’s holdings and borrowings under the GAB, the original intention had been to borrow the full amount of the five currencies of which the Fund’s holdings were lowest (Belgian francs, deutsche mark, French francs, Netherlands guilders, and Swedish kronor), and to obtain what was required of the other currencies wholly from the Fund’s holdings. The signatories of the GAB, however, preferred that the Fund should borrow from each participant except the United Kingdom itself, even if only a token sum were borrowed. The reason for this was partly a wish for solidarity among the participants, and partly a doubt whether the terms of the agreement between the participants which was embodied in Mr. Baumgartner’s letters29 would permit a member of the Group of Ten to vote on the proposal to activate the GAB if its currency was not borrowed.

The Managing Director was prepared to agree to the proposal that the currency of each participant should be borrowed to a greater or lesser degree, except that he demurred at the Fund’s borrowing any currency of which its holdings would exceed 75 per cent of the member’s quota after the drawing. Until October this would have excluded any borrowing of Canadian dollars, as well as of U.S. dollars, but at the end of that month, prompted by a large increase in its reserves, Canada repurchased its currency from the Fund to an extent that reduced the Fund’s holdings to 75 per cent of quota. The final allocation of currencies between the Fund’s holdings and borrowings under the GAB was made on a sliding scale. For the three currencies of which the Fund’s holdings were smallest in relation to quota (ranging from 20 per cent to 42 per cent), the whole sum needed was borrowed; for two currencies, of which the Fund’s holdings were 52–55 per cent of quota, the percentage borrowed was 75; for one, of which the Fund’s holdings were at 64 per cent of quota, the percentage borrowed was 50; and for the other two, of which the Fund’s holdings were at 75 per cent, the percentage borrowed was 25. The appropriate sums were transferred to the United Kingdom’s account on December 2.

In February 1965 it became known to the Fund staff that some $3 billion of credits to the United Kingdom, which had been arranged in the previous November concurrently with the drawing, would expire in May. This made it likely that the British authorities would then seek a further drawing to enable them to repay such of the credits as had been used. The staff accordingly gave thought to a possible distribution of currencies to make up a drawing of $1 billion or $1.5 billion.

On April 21 the Managing Director handed to the Executive Directors appointed or elected by the ten countries in the GAB a possible schedule of currencies to be drawn from the Fund’s holdings, to be borrowed, and to be obtained from the sale of gold. As it appeared probable that the United Kingdom would wish to draw as much as it could without increasing the Fund’s holdings of sterling beyond 200 per cent of the British quota, the draft schedule assumed a drawing of $1,400 million. The main proposal was that the amount of gold sold should be one fourth of the total, as in 1964. This would yield $350 million. It was planned to use $200 million from the Fund’s holdings of U.S. dollars, and $25 million each from its holdings of Danish kroner and Spanish pesetas—the substitution of the kroner for Austrian schillings being due to the improvement in the Danish balance of payments, and the deterioration of that of Austria, since the 1964 drawing. The remainder ($800 million) of the drawing would be found in the currencies of the members of the GAB other than the United States and the United Kingdom. The division between drawings on the Fund’s holdings and drawings on borrowed funds would depend (as in 1964) on the proportion of the Fund’s holdings of each currency to that country’s quota.

On April 29 the United Kingdom, which had by then used up $1.1 billion of the $3 billion of inter-central-bank credits, requested a drawing of $1.4 billion. On the same day the Managing Director had a further discussion with the Executive Directors from the countries that were signatories of the GAB, preparatory to issuing a formal proposal for its activation. At this meeting some criticism developed of the plans put forward on April 21. Specifically, it was urged that a larger proportion of the total should be found by the sale of gold, preferably one third, as had been done for the British drawing in August 1961. Directors also wished more use to be made of the Fund’s holdings and less of currencies borrowed through the GAB. In consequence, a revised plan was immediately prepared and cleared with the Executive Directors concerned. This provided for a sale of gold amounting to $400 million and for an increase from $187 million (out of $800 million) to $225 million (out of $750 million) in the amount to be taken from the Fund’s holdings of the currencies of the GAB countries other than the United States. The proportion of the total needed of each currency that was borrowed under the GAB was again related inversely to the proportion of the Fund’s holdings of that currency to the country’s quota; it varied from 93 per cent for France and Germany down to 44–45 per cent for Canada, Italy, and Japan. The drawing was approved on May 12; its constitution is shown in Table 20.

Table 20.Constitution of Drawing by United Kingdom, May 1965(In millions of U.S. dollars or equivalents)
CurrenciesFrom Fund

Holdings
From

GAB
From Sales

of Gold
Total
Belgian francs17.537.527.582.5
Canadian dollars45.035.027.5107.5
Danish kroner25.05.030.0
Deutsche mark12.5167.5132.5312.5
French francs10.0140.092.5242.5
Italian lire85.065.032.5182.5
Japanese yen30.025.022.577.5
Netherlands guilders17.537.532.587.5
Spanish pesetas25.015.040.0
Swedish kronor7.517.512.537.5
U.S. dollars200.0200.0
Total475.0525.0400.001,400.0

Results of policy

Despite the difficulty created by the unavailability of U.S. dollars, the policy worked out in 1961 has been successful in reducing the disparities which previously existed between the ratios of the reserve positions in the Fund to official gold and foreign exchange reserves for those members whose currencies have been used for repurchases. Table 21 shows these ratios as they were shortly before the Managing Director made his statement and as they were at the end of the period covered by this volume. It will be seen that, before the policy for the selection of currencies was introduced, the ratios between the members’ positions in the Fund and their gold and foreign exchange reserves varied from 2 to 10 per cent. By 1965 the range of ratios had been narrowed, for most of the countries concerned, to 13–17 per cent. The low ratios for the other two countries, Austria and Spain, were due to the imminent exhaustion of the Fund’s holdings of their currencies.

Table 21.Ratio of Reserve Position in the Fund to Official Gold and Foreign Exchange Holdings: Selected Countries, as at December 31, 1960 and 19651(In per cent)
CountryRatio, 1960Ratio, 1965
Austria36
Belgium615
Canada813
France1016
Germany517
Italy213
Japan713
Netherlands717
Spain11
Sweden817

The countries selected are those whose currencies have been used regularly, during most of the period, for drawings in accordance with the criteria for the selection of currencies. The United Kingdom and the United States are excluded because of balance of payments weakness. Australia, Denmark, and Mexico are omitted because their currencies were not considered for use until 1965.

The countries selected are those whose currencies have been used regularly, during most of the period, for drawings in accordance with the criteria for the selection of currencies. The United Kingdom and the United States are excluded because of balance of payments weakness. Australia, Denmark, and Mexico are omitted because their currencies were not considered for use until 1965.

STATISTICAL APPENDIX

Table 22 details the amounts drawn by each member of the Fund in each calendar year from 1947 through 1965.

Table 22.Drawings from the Fund, Calendar Years 1947–651(In millions of U.S. dollars)
Member1947194819491950195119521953195419551956
Afghanistan
Algeria
Argentina
Australia20.030.0
Austria
Belgium11.022.0
Bolivia2.53.0*
Brazil37.528.037.565.5
Burma15.0
Burundi
Cameroon
Canada
Central African Rep.
Ceylon
Chad
Chile8.812.5
China
Colombia25.0
Congo (Brazzaville)
Congo, Dem. Rep.
Costa Rica1.2
Cuba12.5
Cyprus
Czechoslovakia6.0
Dahomey
Denmark3.46.8
Dominican Rep.
Ecuador
El Salvador2.5
Ethiopia0.30.3
Finland4.55.0*
France125.0
Gabon
Germany
Ghana
Greece
Guatemala
Guinea
Haiti
Honduras
Iceland
India68.331.7
Indonesia15.055.0
Iran6.62.217.519.7*
Iraq
Ireland
Israel
Italy
Ivory Coast
Jamaica
Japan124.0
Jordan
Kenya
Korea
Kuwait

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates that no drawing was made; an asterisk (*) designates drawings made wholly or partly under stand-by arrangements.

195719581959196019611962196319641965TotalMember
5.65.61.7*12.9Afghanistan
Algeria
75.072.5*70.0*60.0*50.0*50.0*377.5Argentina
175.0225.0Australia
Austria
50.083.0Belgium
1.0*2.0*3.4*1.0*2.0*3.5*4.0*22.4Bolivia
37.554.8*47.760.0*60.075.0*503.4Brazil
15.0Burma
2.0*2.0Burundi
Cameroon
300.0300.0Canada
Central African Rep.
11.211.223.0*45.5Ceylon
Chad
31.1*10.6*0.7*76.0*40.0*20.0*36.0*235.7Chile
China
5.0*10.0*65.0*7.5*48.5*7.5*168.5Colombia
Congo (Brazzaville)
Congo, Dem. Rep.
7.5*2.5*10.0*10.0*31.2Costa Rica
35.0*25.072.5Cuba
2.02.0Cyprus
6.0Czechoslovakia
Dahomey
34.044.2Denmark
9.0*15.0*5.0*29.0Dominican Rep.
5.014.0*4.0*11.0*34.0Ecuador
5.5*13.2*8.0*29.2El Salvador
0.6Ethiopia
9.5Finland
262.5*131.2*518.8France
Gabon
Germany
14.214.2Ghana
Greece
5.0*5.010.0Guatemala
Guinea
1.02.5*1.9*1.5*3.2*5.0*3.0*2.5*20.7Haiti
6.2*3.8*5.0*2.4*5.0*2.5*5.0*30.0Honduras
6.8*6.8Iceland
200.0*250.025.0*200.0*775.0India
61.2*21.2*20.0*172.5Indonesia
5.045.0*7.5*17.5121.0Iran
Iraq
Ireland
3.812.516.2Israel
225.0225.0Italy
Ivory Coast
Jamaica
125.0249.0Japan
Jordan
Kenya
Korea
Kuwait

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates that no drawing was made; an asterisk (*) designates drawings made wholly or partly under stand-by arrangements.

Member1947194819491950195119521953195419551956
Laos
Lebanon
Liberia
Libya
Luxembourg
Malagasy Rep.
Malawi
Malaysia
Mali
Mauritania
Mexico22.522.5*
Morocco
Nepal
Netherlands52.023.3
New Zealand
Nicaragua0.51.9*
Niger
Nigeria
Norway9.6
Pakistan
Panama
Paraguay0.91.5
Peru
Philippines10.05.0
Poland
Portugal
Rwanda
Saudi Arabia
Senegal
Sierra Leone
Somalia
South Africa10.0
Spain
Sudan
Sweden
Syrian Arab Rep.
Tanzania
Thailand
Togo
Trinidad & Tobago
Tunisia
Turkey5.010.020.0
Uganda
United Arab Rep.3.015.0
United Kingdom240.060.0561.5
United States
Upper Volta
Uruguay
Venezuela
Viet-Nam
Yugoslavia9.0
Zambia
Totals467.7208.0101.534.685.1229.562.527.5692.6

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates that no drawing was made; an asterisk (*) designates drawings made wholly or partly under stand-by arrangements.

195719581959196019611962196319641965TotalMember
Laos
Lebanon
3.6*3.8*3.0*10.4Liberia
Libya
Luxembourg
Malagasy Rep.
Malawi
Malaysia
5.0*5.0*9.9Mali
Mauritania
22.5*45.0*112.5Mexico
13.113.1Morocco
Nepal
68.8144.1Netherlands
62.062.0New Zealand
3.8*1.9*6.0*11.5*12.0*37.5Nicaragua
Niger
Nigeria
9.6Norway
12.553.5*66.0Pakistan
2.72.7Panama
4.0*0.8*1.0*8.1Paraguay
10.0*4.5*14.5Peru
8.86.228.358.3Philippines
Poland
Portugal
Rwanda
Saudi Arabia
Senegal
Sierra Leone
4.7*5.6*10.3Somalia
36.2*12.525.083.7South Africa
50.050.0Spain
5.01.25.418.830.4Sudan
Sweden
15.0*5.6*18.5*39.1Syrian Arab Rep.
Tanzania
Thailand
Togo
Trinidad & Tobago
5.2*11.8*17.0Tunisia
13.525.016.0*15.0*21.5*19.0*145.0Turkey
Uganda
15.034.810.067.4*21.025.0*15.0*206.2United Arab Rep.
1,500.01,000.0*1,400.0*4,761.5United Kingdom
525.0*435.0*960.0United States
Upper Volta
15.0*15.0Uruguay
Venezuela
Viet-Nam
22.975.0*30.050.0*186.9Yugoslavia
Zambia
977.1337.9179.8279.82,478.5583.8333.21,949.82,433.511,462.4Totals

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates that no drawing was made; an asterisk (*) designates drawings made wholly or partly under stand-by arrangements.

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates that no drawing was made; an asterisk (*) designates drawings made wholly or partly under stand-by arrangements.

Table 23 shows the amounts of the drawings listed in Table 22 that were repurchased by each member in each year. The final column shows the amount (if any) of the drawings which was still outstanding on December 31, 1965. The following points should be noted:

Table 23.Repurchases of Drawings, Calendar Years 1947–651(In millions of U.S. dollars)
Member1947194819491950195119521953195419551956
Afghanistan
Algeria
Argentina
Australia12.024.014.0
Austria
Belgium0.920.7
Bolivia
Brazil65.537.528.0
Burma
Burundi
Cameroon
Canada
Central African Rep.
Ceylon
Chad
Chile3.43.71.70.2
China
Colombia
Congo (Brazzaville)
Congo, Dem. Rep.
Costa Rica0.90.3
Cuba
Cyprus
Czechoslovakia2.00.7
Dahomey
Denmark10.2
Dominican Rep.
Ecuador
El Salvador
Ethiopia0.30.3
Finland2.04.53.0
France20.060.045.0
Gabon
Germany
Ghana
Greece
Guatemala
Guinea
Haiti
Honduras
Iceland
India46.740.712.5
Indonesia15.0
Iran8.711.9
Iraq
Ireland
Israel
Italy
Ivory Coast
Jamaica
Japan61.662.4
Jordan
Kenya
Korea
Kuwait

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates no repurchase; a blank in the last column means that any drawings made have been wholly repurchased.

At December 31, 1965.

195719581959196019611962196319641965TotalMemberOut-

standing2
Afghanistan12.9
Algeria
21.513.059.036.042.044.0215.5Argentina146.0
175.0225.0Australia
Austria
50.071.6Belgium
1.02.54.02.32.94.81.018.4Bolivia4.0
17.220.220.017.555.528.055.0344.5Brazil159.0
3.04.04.04.015.0Burma
2.02.0Burundi
Cameroon
79.7166.0245.7Canada
Central African Rep.
7.57.5Ceylon38.0
Chad
12.30.712.416.712.710.037.0110.7Chile125.0
China
5.05.015.015.020.024.084.0Colombia84.5
Congo (Brazzaville)
Congo, Dem. Rep.
6.60.41.31.711.3Costa Rica20.0
22.525.015.02.565.0Cuba7.5
Cyprus2.0
0.70.70.70.70.76.0Czechoslovakia
Dahomey
25.58.544.2Denmark
9.09.0Dominican Rep.20.0
5.06.23.36.62.023.0Ecuador11.0
2.57.511.28.029.2El Salvador
0.6Ethiopia
9.5Finland
200.0181.1506.1France
Gabon
Germany
5.65.6Ghana8.6
Greece
1.13.95.0Guatemala5.0
Guinea
1.32.81.31.52.52.311.7Haiti9.0
2.53.83.71.23.82.52.52.522.5Honduras7.5
4.02.86.8Iceland
72.5127.525.050.075.0449.9India325.1
9.018.527.539.1109.0Indonesia63.5
8.416.919.537.93.5106.9Iran14.0
Iraq
Ireland
3.812.516.2Israel
65.365.3Italy
Ivory Coast
Jamaica
125.0249.0Japan
Jordan
Kenya
Korea
Kuwait

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates no repurchase; a blank in the last column means that any drawings made have been wholly repurchased.

At December 31, 1965.

Member194719481949;1950195119521953195419551956
Laos
Lebanon
Liberia
Libya
Luxembourg
Malagasy Rep.
Malawi
Malaysia
Mali
Mauritania
Mexico22.522.4
Morocco
Nepal
Netherlands27.348.0
New Zealand
Nicaragua0.5
Niger
Nigeria
Norway9.6
Pakistan
Panama
Paraguay0.4
Peru
Philippines
Poland
Portugal
Rwanda
Saudi Arabia
Senegal
Sierra Leone
Somalia
South Africa10.0
Spain
Sudan
Sweden
Syrian Arab Rep.
Tanzania
Thailand
Togo
Trinidad & Tobago
Tunisia
Turkey5.06.09.0
Uganda
United Arab Rep.3.0
United Kingdom108.3
United States
Upper Volta
Uruguay
Venezuela
Viet-Nam
Yugoslavia
Zambia
Totals2.324.345.8101.5162.8210.0232.4113.3

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates no repurchase; a blank in the last column means that any drawings made have been wholly repurchased.

At December 31, 1965.

195719581959196019611962196319641965TotalMemberOut-standing2
Laos
Lebanon
Liberia10.4
Libya
Luxembourg
Malagasy Rep.
Malawi
Malaysia
Mali9.9
Mauritania
22.545.0112.5Mexico
5.95.9Morocco7.2
Nepal
63.7139.1Netherlands
New Zealand62.0
1.93.81.91.55.511.226.3Nicaragua11.2
Niger
Nigeria
9.6Norway
12.512.5Pakistan53.5
Panama2.7
0.51.50.91.61.80.50.50.58.1Paraguay
14.514.5Peru
15.02.92.92.96.214.044.0Philippines14.3
Poland
Portugal
Rwanda
Saudi Arabia
Senegal
Sierra Leone
Somalia10.3
36.237.583.7South Africa
50.050.0Spain
0.42.92.96.2Sudan24.2
Sweden
0.72.21.23.97.015.0Syrian Arab Rep.24.1
Tanzania
Thailand
Togo
Trinidad & Tobago
Tunisia17.1
7.08.03.03.05.59.517.516.015.0104.5Turkey40.5
Uganda
2.79.612.710.02.512.028.581.0United Arab Rep.125.2
200.0296.8420.0852.21,877.4United Kingdom2,370.4
United States383.5
Upper Volta
Uruguay15.0
Venezuela
Viet-Nam
9.07.57.57.930.015.076.9Yugoslavia110.0
Zambia
63.8347.7573.3654.3753.61,305.8267.1510.2390.55,758.6Totals4,354.1

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates no repurchase; a blank in the last column means that any drawings made have been wholly repurchased.

At December 31, 1965.

A dot (•) indicates that the country was not a member at the time; a dash (—) indicates no repurchase; a blank in the last column means that any drawings made have been wholly repurchased.

At December 31, 1965.

(a) The figure in the last column does not necessarily represent the difference between the amounts drawn and the amounts repurchased by the member. The reason is that if any member A’s currency is drawn by another member, the Fund’s holdings of A’s currency are reduced; if A has itself drawn, the amount that it has to repurchase is correspondingly reduced. (This has affected especially the United States.)

(b) The absence of a figure in the last column means only that any drawings have been wholly repurchased. The Fund’s holdings of the member’s currency may be below, at, or above 75 per cent of the member’s quota. They may be below 75 per cent if other members have drawn that currency, or above 75 per cent if the member concerned has not yet paid 25 per cent of its subscription in gold.

Details of stand-by arrangements are appended to Chapter 20.

1

See above, pp. 421–22.

2

E.B. Decision No. 876-(59/15), April 27, 1959; below, Vol. III, p. 232.

3

E.B. Decision No. 1345-(62/32), May 23, 1962; below, Vol. III, p. 233.

4

Only the highlights of the Fund’s policy on repurchases are described in this section. For a full description of the relevant technicalities the reader is referred to Fund Circular No. 9.

5

See, e.g., in Vol. III below, pp. 220, 243–44, 269–73.

6

See also E.B. Decision No. 493-3, November 4, 1949; below, Vol. III, p. 272.

7

E.B. Decision No. 124-2, January 22, 1947; below, Vol. III, p. 244.

8

E.B. Decision No. 447-5, June 17, 1949; below, Vol. III, p. 244.

9

E.B. Decision No. 419-1, April 11, 1949; below, Vol. III, p. 244.

10

E.B. Decision No. 521-3, January 16, 1950; below, Vol. III, p. 273.

11

E.B. Decision No. 7-(648), March 8, 1951; below, Vol. III, p. 244.

12

E.B. Decision No. 1813-(65/4), January 18, 1965; below, Vol. III, p. 245.

13

E.B. Decision No. 705-(57/55), November 7, 1957; below, Vol. III, p. 245.

14

Annual Report, 1966, Table 55, p. 131.

15

Annual Report, 1965, Table 55, p. 114.

16

Annual Report, 1966, Table 55, p. 131.

17

E.B. Decision No. 321-(54/32), June 15, 1954; below, Vol. III, p. 222.

18

See below, p. 469.

19

E.B. Decision No. 270-(53/95), December 23, 1953; below, Vol. III, pp. 231–32.

20

E.B. Decision No. 876-(59/15), April 27, 1959; below, Vol. III, pp. 232–33.

21

See above, p. 402.

22

See above, pp. 402–406.

23

Resolution 13-10, Summary Proceedings, 1958, p. 178. See above, p. 358.

24

See above, p. 445.

25

See above, p. 411.

26

E.B. Decision No. 1371-(62/36), July 20, 1962; below, Vol. III, p. 235.

27

See below, p. 455.

28

See above, p. 376.

29

See above, Vol. I, p. 512; below, pp. 520–21 of this volume; and below, Vol. III, p. 252.

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