Chapter

Enlargement of Fund Resources Through Increases in Quotas

Author(s):
International Monetary Fund
Published Date:
February 1996
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At the Annual Meetings in 1958 the subject discussed in the preceding document was extensively canvassed by Governors. On the motion of the Governor for the United States, a resolution was passed requesting the Executive Directors to consider promptly the question of enlarging the resources of the Fund through increases in quotas. As a result, the Board adopted, on December 19, 1958, the following report to the Governors. This was accepted by the Governors, and took effect from September 9, 1959.

Enlargement of Fund Resources Through Increases in Quotas Report by the Executive Directors to the Board of Governors of the International Monetary Fund

(December 1958)

INTRODUCTION

At the Thirteenth Annual Meeting at New Delhi, the Board of Governors adopted the following Resolution:

Resolved:

That the Executive Directors promptly consider the question of enlarging the resources of the Fund through increases in quotas and that, if, having regard to views expressed by Governors and considering all other aspects of the matter, they find that action to carry out such increases would be desirable, they submit an appropriate proposal to the Board of Governors for action either at a meeting of the Board or by vote without a meeting, as the Executive Directors may determine.

Pursuant to this Resolution the Executive Directors have studied the question of enlarging the resources of the Fund by quota increases, so as to enable the Fund to promote more effectively its purposes as set out in the Articles of Agreement. They have concluded that a substantial enlargement of the resources of the Fund is highly desirable. The grounds for this conclusion and the manner in which an appropriate increase in Fund quotas could best be brought about are discussed in the following sections of this report.

To accomplish the proposed increase in the Fund’s resources, the annexed Resolutions have been prepared for adoption by the Board of Governors. Attention is drawn to the requirement that votes, to be valid, must be received at the seat of the Fund on or before February 2, 1959.

I. INCREASE IN THE FUND’S RESOURCES

The need for an increase in the Fund’s resources arises from the tasks which, under its Articles of Agreement, the Fund has to perform in an expanding world economy. The role that the Fund is likely to play in the future and the resources it will need for this purpose can best be assessed in the light of the experience it has accumulated and the policies it has pursued in the twelve years of its existence.

The Fund has two main tasks which are clearly intertwined. It promotes international monetary cooperation and exchange stability as a basis for the balanced growth of world trade. It also provides financial assistance to members to help them stabilize their currencies, maintain or move toward convertibility, and overcome temporary balance of payments problems without resort to policies that would be harmful to national or international prosperity. While the first task is a continuing one, experience has shown that the granting of financial assistance tends to be concentrated in certain periods characterized by exceptional strains in the world’s monetary system. Major economic and financial developments will often affect several countries more or less at the same time, so that the calls on the Fund’s resources may be of substantial proportions in a relatively short period. There was one such period in the early years of the Fund’s existence, namely, in 1947–49, when certain European countries suffered from extreme foreign exchange shortages; and another, leading to even larger drawings, which started late in 1956. Although the extreme tensions that gripped the major exchange markets in 1956 and 1957 have now abated, requests for financial assistance from members continue to be received almost every month. Countries whose economies are subject to wide seasonal swings have called on the Fund for short-term assistance to bridge the seasonal troughs in their reserves, and many other countries have also come to the Fund for assistance when, for particular reasons affecting their own economies, they have experienced difficulties in their balance of payments.

Since the beginning of its operation, the Fund has made available about $4.1 billion to 36 countries. Of this sum, $3.2 billion was drawn in some 150 transactions; over $800 million is still available for drawing under open stand-by facilities; and stand-by credits of over $100 million were allowed to expire as the members concerned no longer felt the need for them (see tables, pages 436–41). About two thirds of the total of $4.1 billion has been arranged in the last two years. The needs for assistance in this recent period have arisen from a wide variety of causes which have revealed the many-sided nature of the Fund’s financial activities.

The largest single transaction in this period arose out of the Suez events which caused sterling to come under pressure. In December 1956, the United Kingdom drew $561 million from the Fund and entered into a stand-by arrangement for $739 million—a total of $1,300 million. The assistance was granted on the basis of a declaration by the British Government that strict financial and credit policies would be pursued, that quantitative import restrictions would not be reimposed, and that the value of sterling would be maintained. This was an emergency situation in which the massive use of the Fund’s resources was required to prevent a major crisis in the international exchange structure.

In the latter part of 1956 and the first half of 1957, highly expansionary developments in many countries produced severe pressures in national and international money and capital markets. Large government deficits gave rise to serious declines of foreign exchange in a number of countries. In the third quarter of 1957, lack of confidence in the stability of the pattern of European exchange rates led to large international movements of funds. These and other causes gave rise to requests for assistance from all over the world. Among the countries that drew on the Fund were Argentina, Bolivia, Brazil, Chile, Cuba, Denmark, France, Japan, and the Netherlands. For some countries, stand-by agreements were renegotiated, often with new provisions adapted to changed circumstances. In this period of pronounced boom, the pursuit of cautious credit policies was more than ever required, a fact which was reflected in the declarations of intent which were made by the Governments then requesting assistance from the Fund and on the basis of which the Fund acted.

The recession which started in 1957 brought a new set of circumstances. A number of industrial countries were able to improve their reserve positions substantially, but many of the primary producing countries suffered from the decline in raw material prices. As a result of the inherent strength of the major economies and the financial and commercial policies followed, the recession proved to be short and did not lead to an extensive use of Fund resources. Indeed, most of the Fund’s transactions in 1957–58 were related to difficulties that found their main origin in inflationary pressures.

The correction of inflationary conditions requires internal corrective measures, and one of the principal benefits of Fund assistance is that it gives time for these measures to take effect. In some cases the assistance of the Fund has been closely linked to the carrying out of comprehensive stabilization programs; examples of this in Latin America are Bolivia, Brazil, Chile, Colombia, Haiti, Paraguay, and Peru, and elsewhere, France and Turkey. The main lines of these programs have been indicated to the Fund in declarations made by the Governments, and in these cases the declarations have formed an essential part of the stand-by arrangements. A noteworthy feature of these stabilization efforts is that the Fund’s assistance has frequently been supplemented by substantial credits from other sources. Countries embarking on stabilization programs are often in need of different kinds of foreign resources; indeed, one of the advantages of such parallel arrangements is that in some measure they provide assistance tailored to the particular needs of the countries concerned. For instance, the Fund’s assistance is of a short-term character designed to strengthen reserve positions, while resources obtained from other agencies may be either related to special categories of payment (as when furnished by the European Payments Union) or of a more long-term character, appropriate for investment financing. The importance of the Fund’s participation in these parallel arrangements has generally been a double one: the Fund has played a leading role in assisting countries to work out their stabilization programs, and the strengthening by the Fund of the country’s reserves has been an essential part of these programs.

The Fund’s transactions have been fully described in its Annual Reports, but enough has been said here to indicate that the assistance obtained from the Fund has been requested under a great variety of circumstances: in an emergency at the time of the Suez events, in conditions of boom and expanding world trade, and in periods of recession, as well as in a wider context when stabilization efforts have been undertaken. The only conclusion can be that the Fund must remain prepared for diverse contingencies, many of which cannot be clearly defined in advance.

The ability of the Fund to grant assistance so promptly and on such a considerable scale in the last two years was due to the fact that, since in the immediately preceding period there had been very few transactions and nearly all the earlier drawings had been repaid, most of its resources in gold and convertible currencies were intact. The many transactions with the Fund in this recent period have, of course, considerably decreased the amount of its uncommitted resources. At the end of November 1958, the Fund’s holdings of gold and U.S. dollars amounted to $2.3 billion. If commitments under stand-by arrangements, totaling $0.8 billion, are deducted, the balance of gold and U.S. dollars was $1.5 billion, compared with $3.5 billion at the end of September 1956. Considering that the use of the Fund’s resources in the form of drawings and stand-by arrangements came to over $2.7 billion in the two years from October 1956 to September 1958, the resources of about $1.5 billion presently available cannot be considered adequate in the light of past experience to meet such calls on the Fund as may suddenly be made. This is even more evident if it is borne in mind that the Fund must always maintain enough liquid resources to give its members confidence that they have a second line of reserves in the Fund.

At the Thirteenth Annual Meeting of the Board of Governors in New Delhi, a number of Governors suggested that consideration be given to the increased effectiveness of the Fund’s present resources that might be achieved if greater use were made of the currencies of the main industrial countries other than the United States, even though those currencies are not fully convertible within the meaning of the Fund’s Articles of Agreement. The Executive Directors have not yet fully explored this question, but they are hopeful that measures can be devised that would facilitate such drawings. In recent transactions, there has already been an encouraging increase in the demand for currencies other than the U.S. dollar, and it is expected that there will be continued progress in this direction. The acceptance of convertibility under Article VIII, or even the more limited step of external convertibility by the more important trading countries, would be most helpful in this connection. As convertibility is attained or approached, the question whether drawings in these currencies can or cannot be repaid in the same currencies will lose much of its practical importance. However, while developments along these lines are certainly greatly to be welcomed and will help the Fund in the future, the Fund must nevertheless be prepared for situations in which its holdings of gold and convertible currencies may be of decisive importance.

It has been mentioned above that countries which have received assistance from the Fund have, as a rule, made declarations of intent as to the policies they would follow. They have done so in accordance with the principles governing the use of the Fund’s resources, which had been laid down by the Executive Directors and stated in Annual Reports well before the recent period of increased activity. Because the Fund’s policy toward requests for drawings or stand-by arrangements must be applicable to large and small countries alike, it is expressed in terms not of the absolute amount involved, but of the proportion which this amount bears to the country’s quota.

Countries are given the overwhelming benefit of the doubt with respect to requests for drawings within the “gold tranche,” i.e., the portion of quota which can be regarded as equivalent to the member’s gold subscription. The Fund’s attitude to requests for drawings within the first credit tranche (equal to the first 25 per cent of the quota above the “gold tranche”) is a liberal one, provided that a member wishing to make such a drawing is also itself making reasonable efforts to solve its problems. Members’ requests for drawings or stand-by arrangements beyond the first credit tranche are likely to be favorably received when they are intended to support well-balanced and adequate programs which are aimed at establishing or maintaining the enduring stability of the currencies concerned at realistic rates of exchange.

Along with these principles governing access to its resources, the Fund has established certain principles covering repurchases, which emphasize the basic requirement for a drawing, namely, that it is required to meet temporary balance of payments difficulties and that the Fund should be repaid within a period appropriate to the problem for which Fund assistance is sought. Hence, members are expected to repurchase drawings within an outside range of three to five years, but in appropriate circumstances the Fund requires repurchase within an even shorter period. A member entering into a stand-by arrangement is generally required to repurchase within three years of any drawing under the arrangement, but again this period may be shorter in appropriate circumstances. Several members have in fact completed their repurchases in much shorter periods than had originally been specified. Indeed, all the resources made available by the Fund before 1956 have now been repaid with the exception of $36.5 million, and this has not been outstanding for a protracted period. These policies for repurchase assure the revolving character of the Fund’s resources. They are intended to replenish these resources within a reasonable period; they also ensure that each country that draws on the Fund to handle a particular difficulty will put itself in a position, by repaying the Fund as soon as possible, where it can avail itself again of the Fund’s assistance whenever a new need presents itself.

The experience of the last two years has shown that these principles and practices of the Fund are eminently applicable to its transactions. Not only do they serve to give coherence to the financial side of the Fund’s work, but the fact that they have been made fully known in an authoritative way to the members leaves no room for uncertainty as to the principles which are applied in the Fund’s decisions on financial assistance. Whether a member country will in fact be allowed to use the Fund’s resources is, of course, a matter for judgment in each decision, according to the particular circumstances of the case, and it is here that the Fund must apply appropriate flexibility within the framework of the accepted principles and practices. By the close link that the application of these principles and practices establishes between the Fund’s financial assistance and the maintenance or adoption of the necessary remedial measures in the countries concerned, the Fund supports the observance of that degree of financial self-discipline without which the international monetary system cannot function properly. One of the consequences of the breakdown of the gold standard in the 1930’s was a large measure of uncertainty as to the proper rules for monetary management and a corresponding need for countries both to agree on a new set of rules and to work out cooperative ways of applying them. In these respects, the Fund has already made, and should be able to continue to make, a substantial contribution. It is able to do so in connection with the use of its resources, and also in other ways. A most important function is performed by the consultations which the Fund holds once a year with each of the countries that still maintain exchange restrictions under Article XIV of the Agreement. These annual consultations provide an opportunity to review with a country whether there is a continued need for these restrictions, as well as the measures that could be taken by the country to create conditions in which restrictions could be reduced or abolished. The Fund can also make a contribution by providing a forum for the crystallization of world opinion, and through its publications and technical assistance.

The Executive Directors are of the opinion that the policies and practices governing the use of the Fund’s resources, which have now successfully stood the test of practical application, should not be changed as a consequence of the increases in quotas now envisaged. While the Fund must, of course, remain alert to the needs of changing circumstances, it will at all times have to ensure that its transactions with its members promote the purposes of the Articles of Agreement.

The power of the Fund to help its members over difficulties is not confined to the actual transfer of resources to the members. There are several cases, some of them of great importance, in which countries that have entered into stand-by arrangements with the Fund have not in fact made any drawings under them. In this way the financial assistance of the Fund, in the form of a line of credit, has been effective even without any new money being injected into the world economy. Naturally, from the point of view of its own liquidity, the Fund is affected by these stand-by arrangements even though there is no actual transfer of currencies, since it must regard the corresponding resources as subject to a contingent liability.

The possibility of access to the Fund’s resources serves in itself as a second line of reserves, which gives members more confidence in undertaking efforts to restore balance, and may indeed encourage them to move faster toward achieving the purposes of the Fund than if they had to rely on their own resources alone. In this manner the Fund can be helpful to many of its members, whether they are in the initial stages of freeing their trade and payments from the shackles of restrictions or are well on the way toward making their currencies convertible.

It must also be stressed that the benefits which the Fund conveys by the use of its resources are by no means limited to those countries which have sought or may seek assistance from the Fund. Countries which are in such a strong position that they do not envisage making any request to the Fund also share in the benefits. Countries all over the world have a great interest in the financial rehabilitation of countries in difficulties, and more generally in the establishment of a properly functioning international monetary system. As far as recent Fund activities are concerned, it was clearly in the general interest that a crack in the world’s exchange structure was avoided in 1956, that tension in the European exchange markets was eliminated in 1957, and that countries have been helped to push forward with their stabilization programs. It is in the general interest that by means of a strengthening of the Fund’s position, together with continued observance of financial self-discipline, a sound monetary basis is created for the renewed expansion of world trade. It should never be forgotten that pressure on one currency may, under adverse circumstances, affect the position of other currencies. In 1931, at the time of world-wide depression, a financial breakdown which began in Austria spread so widely that in the end almost every country in the world had to alter its exchange rate or introduce restrictions on trade and payments harmful from every point of view. While no progress can be achieved without appropriate steps being taken in individual countries, the granting of financial assistance through the Fund reflects the idea that international assistance may be required to enable countries to take these steps.

It is therefore in the interest of all members of the Fund that the common pool constituting a secondary reserve should be adequate to meet the difficulties which may arise in the future. In considering the need for an increase in the Fund’s resources, account must be taken of the fact that in the last decade the volume of world trade has nearly doubled. While reserves of gold and foreign exchange of countries outside the United States have increased by about 50 per cent in that period, Fund quotas have, with minor exceptions, remained at the amounts determined in 1944; and the rise in dollar prices by at least 50 per cent since that date has correspondingly reduced the real value of the Fund’s resources. In fact, the Fund has found it increasingly necessary to waive the provision limiting drawings in any twelve months to 25 per cent of a country’s quota. In recent years, the large majority of the Fund’s drawings and stand-by arrangements have involved waivers of this provision.

The expansion of trade and the greater freedom of international payments, including capital movements, tend to increase the problems that may arise if there should be a sudden change in confidence in any major currency. The occurrence of such a change at some future time cannot altogether be excluded in a world in which monetary confidence has not yet been fully restored and where memories of devaluations and other difficulties still exert an influence in the markets. Countries must therefore be alert to the increased risks to which their reserves may be exposed as a result of the operation of leads and lags in payments and other movements of funds.

Fortunately, over the last year many countries have been able to strengthen their reserves. But the Fund cannot be concerned with only the present or the immediate future; its members must be assured that it is adequately equipped to meet the strains which may arise in emergencies or other adverse circumstances.

The Executive Directors have, therefore, concluded that it is highly desirable to enlarge the Fund’s resources through increases in quotas.

II. MAGNITUDE OF THE INCREASE IN THE FUND’S RESOURCES

An increase of 50 per cent is considered a reasonable basis at this time for quota increases to enlarge the resources of the Fund. A general increase of this magnitude, together with special increases for certain countries described below, would increase the resources of the Fund by $5.1 billion, including gold payments of nearly $1.3 billion. This appears to be as much as members generally can be expected to contribute. If these new resources are made available, members will have increased confidence in the capacity of the Fund to perform its tasks in the coming period.

As shown in Table 1, the proposed increase in quotas would produce a larger relative rise in the Fund’s holdings of gold, U.S. dollars, and other currencies that have been drawn in the past. Thus the Fund’s holdings of gold and U.S. dollars would double, increasing from $2.3 billion to $4.6 billion, and the holdings of gold and of the six currencies that have been drawn would increase by 75 per cent.

Table 1.Changes in Fund Holdings of Gold and Currencies As a Result of Quota Increases(In millions of U.S. dollars)
Holdings

As of

November 30, 1958
Holdings

After Quota

Increase1
Amount of

Increase
Gold and U.S. dollars
Gold1,5312,8101,279
U.S. dollars7871,8181,031
Other currencies that have been drawn2,3184,6282,310
Belgian francs16925384
Canadian dollars210397187
Deutsche mark183526343
Netherlands guilders206309103
Sterling1,6182,106488
2,3863,5911,205
Other currencies24,5076,1061,599
Total9,21114,3255,114

Special Increases

In view of the position in world trade of Canada, the Federal Republic of Germany, and Japan, and their recent relative economic growth, increases in their quotas beyond 50 per cent would be appropriate and highly desirable, particularly because this would enlarge the Fund’s resources of currencies likely to be required by other members. In the light of these considerations and on the basis of statements made on behalf of these three countries, the Executive Directors recommend to the Board of Governors a quota increase for Canada to $550 million, for the Federal Republic of Germany to $787.5 million, and for Japan to $500 million.

Countries with Small Quotas

In the Second Quinquennial Review of Quotas, the quotas of a number of the smaller countries were found to be particularly inadequate. As a result of that review, it was understood that requests for increases in small quotas would be sympathetically considered, and since then it has been the practice of the Executive Directors to recommend, and the Board of Governors to agree to, increases in accordance with the following formula:

  • Quotas below $5 million could be raised to $7.5 million;

  • Quotas of $5 million and above but below $10 million could be raised to $10 million;

  • Quotas of $10 million and above but below $15 million could be raised to $15 million; and

  • Quotas of $15 million and above but below $20 million could be raised to $20 million.

Eight countries with small quotas have taken advantage of this understanding during the last two years. The old quotas for these countries, their present quotas, and their present quotas increased by 50 per cent are shown in Table 2. A special adjustment, from $15 million to $50 million, for the Philippines has also been approved by the Board of Governors.

Table 2
Old QuotaPresent QuotaPresent Quota

Increased by

50 Per Cent
(million U.S. dollars)
Dominican Republic51015
Ecuador51015
El Salvador2.57.511.25
Haiti27.511.25
Honduras2.57.511.25
Israel4.57.511.25
Nicaragua27.511.25
Paraguay3.57.511.25

The other 24 countries with small quotas have not so far requested quota increases under this formula. It is recommended that they now have the opportunity

  • (i) To increase their present quotas by 50 per cent, or

  • (ii) To obtain a quota equal to the amount available under the small quota formula increased by 50 per cent, or

  • (iii) To consent to a quota of an amount between (i) and (ii) as they may choose.

The 24 countries concerned, their present quotas, and the amounts to which they could be raised under (i) and (ii) above, are shown in Table 3.

Table 3
Present

Quota
Present Quota

Increased by

50 Per Cent
Quota Under

Formula Increased

by 50 Per Cent
(million U.S. dollars)
Afghanistan101522.5
Bolivia101522.5
Burma1522.530
Ceylon1522.530
Costa Rica57.515
Ethiopia6915
Ghana1522.530
Guatemala57.515
Iceland11.511.25
Iraq81215
Jordan34.511.25
Korea12.518.7522.5
Lebanon4.56.7511.25
Libya57.515
Luxembourg101522.5
Panama0.50.7511.25
Saudi Arabia101522.5
Sudan101522.5
Thailand12.518.7522.5
Tunisia121822.5
UAR: Syria6.59.7515
Uruguay1522.530
Venezuela1522.530
Viet-Nam12.518.7522.5

Further Adjustment of Quotas

The directive given to the Executive Directors by the Board of Governors was to consider promptly the question of enlarging the Fund’s resources through increases in quotas, and the Resolutions now recommended (see Annex) are based on the general idea of increases of 50 per cent in quotas, with special increases for Canada, the Federal Republic of Germany, and Japan.

The Executive Directors have, however, received from a number of other countries requests for increases beyond 50 per cent of their present quotas. Some of these countries have present quotas of less than $20 million, and have requested increases beyond the amounts available under the small quota formula increased by 50 per cent. It has not been possible within the time available to give adequate consideration to these requests, but the Executive Directors are continuing their consideration of them.

The Executive Directors will, as expeditiously as possible, reach their decisions on these requests and on any other requests that are received early in 1959. The recommendations that they decide to make will be submitted to the Governors in the form of new resolutions. These recommendations will be made promptly and, it is hoped, early enough to permit the members concerned to give their consent before September 15, 1959. It is expected that any such new resolutions would be similar to the Third Resolution annexed to this report.

III. PAYMENT OF ADDITIONAL SUBSCRIPTIONS

When a quota is increased, the member must pay an additional subscription equal to the increase, 25 per cent in gold and the balance in the member’s currency. Payment of both portions of the additional subscription must be made before the increase in the member’s quota can become effective, even by those few members which, in accordance with the Articles of Agreement, have not yet been required to pay their original subscriptions.

The present proposals for increases in quotas are based on the idea of a cooperative effort by the members of the Fund to provide larger resources against contingencies that may affect any member. In order to preserve the general character of that effort, it has been thought preferable not to exercise the discretion to reduce gold payments under Article III, Section 4. However, since the prompt payment in gold of 25 per cent of the quota increase might cause hardship in some cases, the facilities described in the next two paragraphs will be available to members consenting to increases under the First or the Second Resolution.

Provision has been made for such of these members as represent, for reasons which they shall submit to the Fund, that their reserves should not be reduced by an immediate 25 per cent gold payment, to have their quotas increased in installments corresponding to each installment of gold and currency paid. These members will pay an original installment, and an installment in each period of twelve months thereafter. Each installment shall be one fifth of the increase. Members may accelerate payment under this installment schedule.

In exceptional cases, members may wish to have the full increase in their quotas take effect immediately, or members paying under the installment schedule may wish to expedite the full increase in their quotas, but in either case would encounter undue payments difficulties through the reduction of their reserves by the payment of the 25 per cent gold subscription or of the outstanding balance. In order to assist members to meet these payments difficulties, the Fund will sympathetically consider a request, made within two years after the effective date of a member’s quota increase or the first installment of the increase, for an exchange transaction up to 25 per cent of the increase. The Fund will expect that a member requesting such an exchange transaction beyond the gold tranche will represent that it will make a repurchase corresponding to any drawing in equal annual installments, to commence one year after the drawing and to be completed not later than three years after the drawing.

IV. PROCEDURE

1. Voting

The Resolutions presented in the Annex are designed to enable the Board of Governors to vote at one time on all matters connected with increases in quotas therein proposed. When adopted, they will make it possible for increases in quotas to become effective without need for further reference to the Board of Governors.

To be valid, votes must be received at the seat of the Fund on or before February 2, 1959.

Separate votes are required on the First, Second, and Third Resolutions. In voting on the Third Resolution, a Governor may vote on the whole of that Resolution or on each of the increases of quotas there proposed.

2. Date for Consent

If the Resolutions are adopted by the necessary majority of four fifths of the total voting power, a member may consent to the increase in its quota at any time on or before September 15, 1959. Therefore, unless this period is extended by the Fund, members will have until September 15, 1959 to take whatever legal action may be necessary in their countries to enable them to give their consent.

3. Participation

In view of the cooperative nature of the proposed increase in the Fund’s resources, it is provided that, before increases become effective, the Fund must determine that members having 75 per cent of the total of present quotas have consented to increases in their quotas.

In determining whether this degree of participation has been reached, the Fund will take into account all consents to increases, whether they be increases in full or by installments, under the First or Second Resolutions, or increases under the Third Resolution.

4. Relation of Quota Increases to Increased Capital of International Bank for Reconstruction and Development

Under the Resolutions recommended by the Executive Directors of the International Bank for Reconstruction and Development to the Board of Governors of the International Bank for Reconstruction and Development, provision is made for the proposed increase in authorized capital to take effect only if a specified aggregate amount of subscriptions is taken up.

The Fund Resolutions provide that increases in Fund quotas shall take effect only if this condition is satisfied in the Bank. However, it is also provided in the Fund Resolutions that the Board of Governors of the Fund may eliminate this condition by a four-fifths majority if the required member participation is attained in the Fund but not in the Bank.

It is not a condition in the Fund Resolutions that the required percentage of participation in the Fund and Bank must consist of the same members. However, according to the established policy of the Fund, it has been, the practice, where an increase in quota is sought in the Fund, for the member to request a corresponding increase in its subscription in the Bank. The Fund, therefore, expects that any member consenting to an increase in its quota will request a corresponding increase in its subscription to the capital of the Bank.

5. Date for Payment of Additional Subscription

After the Resolutions are adopted, a member may pay its increased subscription in respect of the increase in its quota at any time before it is due. If a member pays before the increase in its quota takes effect, the additional subscription will be kept in separate accounts of the Fund and returned if it should be established that the increase cannot take effect. A member is required to pay its additional subscription not later than thirty days after the latest of the following events: its consent to its quota increase (see 2 above); the determination by the Fund that the condition as to participation in quota increases has been satisfied (see 3 above); and the similar requirement has been satisfied in the Bank (see 4 above).

6. Effective Date of Quota Increases

Increases in members’ quotas will take effect as follows:

(a) When a member pays its additional subscription before the latest of the three events referred to in 5 above, the increase in its quota will take effect on the happening of the latest of these events.

(b) If a member pays its additional subscription after the latest of these three events, the increase in its quota will take effect on the day of payment.

7. Increase of Quotas by Installments

Members consenting to increases in their quotas under the First or Second Resolutions may consent to increases by installments. The foregoing paragraphs in this section of the report will apply to such members, except that the first installment instead of the whole additional subscription will have to be paid as described in 5 above. It should be noted that the increases in quotas will be equal to the installments actually paid.

annex ENLARGEMENT OF FUND RESOURCES THROUGH INCREASES IN QUOTAS Resolutions

Whereas the Executive Directors have considered the question referred to them by the Resolution of the Board of Governors of the International Monetary Fund at their Thirteenth Annual Meeting:

That the Executive Directors promptly consider the question of enlarging the resources of the Fund through increases in quotas and that, if, having regard to views expressed by Governors and considering all other aspects of the matter, they find that action to carry out such increases would be desirable, they submit an appropriate proposal to the Board of Governors for action either at a meeting of the Board or by vote without a meeting, as the Executive Directors may determine;

And having found that action to carry out increases in quotas would be desirable, have set out their conclusions in a report, entitled Enlargement of Fund Resources Through Increases in Quotas, in which it is proposed that the present quota of each member of the Fund shall be increased by 50 per cent, with additional increases for certain members;

And having noted that there are various legal requirements in member countries for giving effect to this proposal, have submitted to the Board of Governors the following Resolutions for a vote without meeting pursuant to Section 13 of the By-Laws of the Fund, which Resolutions propose increases of quotas for all members of the Fund, make provision for consents by members, and establish the conditions upon which the increases consented to shall take effect;

Now therefore the Board of Governors hereby resolves that

First Resolution

1. The International Monetary Fund proposes that, subject to the provisions of this Resolution, the quotas of members of the International Monetary Fund as of January 31, 1959 shall be increased by 50 per cent for each member.

2. None of the increases in quotas proposed in paragraph 1 of this Resolution shall become effective unless:

  • (i) The member concerned has notified the Fund in writing that it consents to the increase in its quota; and

  • (ii) The Fund determines that members having not less than 75 per cent of the total of quotas on January 31, 1959 have consented to increases in their quotas; and

  • (iii) The requirement is satisfied of a minimum aggregate increase in subscriptions, contained in the Resolution of the Board of Governors of the International Bank for Reconstruction and Development entitled Increase of $10,000,000,000 in Authorized Capital Stock and Subscriptions Thereto, recommended by the Executive Directors of the International Bank for Reconstruction and Development; and

  • (iv) The member concerned has paid the full increase in its quota.

Subject to paragraph 7 (c) of this Resolution, each increase in quota shall become effective upon the date of the latest of these four events.

3. The written notices prescribed in paragraph 2 (i) shall be signed by a competent official whose authority and signature are duly authenticated.

4. Notices in accordance with paragraph 2 (i) shall be received in the Fund not later than September 15, 1959, provided that the Executive Directors may extend this period as they may determine.

5. At any time after the percentage of participation prescribed in paragraph 2 (ii) of this Resolution has been reached, the Board of Governors may, by a four-fifths majority of the total voting power, eliminate the requirements in paragraph 2 (iii) of this Resolution, and may make such modifications as to the date of the effectiveness of increases in quotas as may then be determined.

6. Subject to paragraph 7 (b) of this Resolution, each member shall pay to the Fund within thirty days after the latest of the three events in paragraph 2 (i), (ii), and (iii) of this Resolution, 25 per cent of the increase in gold and the balance in its own currency.

7 (a). In giving notice in accordance with paragraph 2 (i) of this Resolution, a member may represent that, for reasons which it shall submit to the Fund, its reserves should not be reduced by an immediate full gold payment in accordance with paragraph 6 of this Resolution, and that it therefore consents to the increase in its quota proposed in paragraph 1 of this Resolution, as an increase by installments.

(b). Notwithstanding paragraph 2 (iv) of this Resolution, a member increasing its quota by installments shall pay not less than one fifth of the gold and currency prescribed in paragraph 6 within thirty days after the latest of the three events in paragraph 2 (i), (ii), and (iii), and shall pay further installments of gold and currency of not less than one fifth of the increase in each twelve months after the first payment until the full amount prescribed in paragraph 6 has been paid.

(c). Subject to paragraph 2 of this Resolution, on the completion of the payment of each installment of the increase, the member’s quota shall be increased by an amount equal to the installment.

8. Since it is in the interests of the Fund and its members that the contemplated increase in its resources be expedited, members are invited to comply as soon as possible with the procedures for notice and payments to the Fund under this Resolution. Any payment made by a member before the effective date of increase in its quota will be kept in separate accounts of the Fund. If it should be established that such increase cannot become effective under this Resolution, the payment will be returned to the member.

Second Resolution

1. The International Monetary Fund proposes that, subject to the provisions of this Second Resolution, if any member to which the small quota policy of the Second Quinquennial Review applies so elects, its quota shall be increased beyond the amount specified in the First Resolution to such an amount, not exceeding a 50 per cent increase in the maximum quota available under the said policy, as such member shall communicate to the Fund at the time that it consents to the increase in its quota.

2. Paragraphs 2 (i) and (iv), 3, 4, 6, 7, and 8 of the First Resolution shall apply to this Second Resolution.

Third Resolution

1. The International Monetary Fund proposes that, subject to the provisions of this Third Resolution, if increases in quotas take effect under the First Resolution, the quotas of Canada, the Federal Republic of Germany, and Japan shall be increased to the amounts shown below:

Canada$550 million
Federal Republic of Germany$787.5 million
Japan$500 million

2. Paragraphs 2 (i) and (iv), 3, 4, 6, and 8 of the First Resolution shall apply to this Third Resolution.

Quotas and Fund Holdings of Currencies and Gold(As of November 30, 1958. Amounts expressed in millions of U.S. dollars, except where noted)
Subscription:Subscription

Account

Repurchases
Sales of

Gold for

Currency
Net

Member

Drawings
Income,

Expenditure,

Etc.
Fund Holdings of

Currencies
MemberQuotaGoldCurrency% of Quota
Afghanistan102.5
Argentina15037.5112.575.0187.5125
Australia2008.4191.6–.1191.596
Austria505.045.0–7.537.575
Belgium22556.2168.8168.775
Bolivia102.57.58.516.0160
Brazil15037.5112.5112.5225.0150
Burma15.514.5–3.215.026.3175
Canada30075.0225.0–15.0210.070
Ceylon15.814.2–3.011.275
Chile508.841.2–3.740.277.7155
China550.1
Colombia5012.537.535.072.5145
Costa Rica5.44.6–.93.775
Cuba5012.537.525.062.5125
Denmark685.962.1–2.68.568.0100
Dominican Republic102.57.57.575
Ecuador102.57.57.575
El Salvador7.51.95.65.675
Ethiopia6.15.9–1.44.575
Finland38.837.2–8.728.575
France525108.1416.9–22.9393.8–.4787.4150
Germany (Fed. Rep.)33033.0297.0–45.1–68.9183.055
Ghana15.514.514.597
Greece40
Guatemala51.23.83.775
Haiti7.51.95.63.59.1122
Honduras7.51.95.65.675
Iceland1.2.8–.1.775
India40027.5372.5200.04.6577.1144
Indonesia11015.594.5–12.055.0137.5125
Iran358.826.216.943.1123
Iraq88.0–2.06.075
Ireland304.525.525.585
Israel7.51.95.63.89.4125
Italy18045.0
Japan25062.5187.5187.575
Jordan3.12.92.997
Korea, Republic of12.53.1
Lebanon4.5.34.2–.93.375
Libya5.2
Luxembourg10.59.59.595
Malaya25.9
Mexico9022.567.567.575
Morocco351.2
Netherlands27568.8206.2206.275
Nicaragua7.51.95.65.675
Norway5012.537.537.575
Pakistan1003.596.596.596
Panama.5.1.4.475
Paraguay7.51.95.66.311.9158
Peru253.221.8–3.15.023.795
Philippines153.811.215.026.2175
Saudi Arabia102.5
Spain10010.0
Sudan10.49.65.014.6146
Sweden10017.083.0–8.075.075
Thailand12.53.1
Tunisia12.4
Turkey4310.832.238.5–.170.6164
Union of South Africa10025.075.036.2111.2111
U Arab Rep: Egypt609.550.5–5.530.075.0125
Syria6.5.26.3–1.44.975
United Kingdom1,300236.31,063.7–3.7545.313.01,618.3124
United States2,750687.52,062.592.0600.0–1,919.5–46.9788.129
Uruguay153.8
Venezuela153.811.211.275
Viet-Nam12.53.1
Yugoslavia607.952.122.9.175.1125
Currency6,517.6–43.7600.0{1,697.0

–2,003.4}
–30.06,737.4
Convertible2,420.992.0600.0–1,906.0–46.91,160.0
Non-Convertible4,096.7–135.71,599.516.95,577.4
Gold1,731.843.7–600.0304.551.01,531.0
Subscript. Receivable943.6943.6
Total9,193.09,193.000–2.021.09,212.0
Exchange Transactions: Drawings and Their Repayment(As of November 30, 1958. Amounts expressed in millions of U.S. dollars)
1958Total to Date
Member19471948194919501951195219531954195519561957to

Date
GrossNet
Argentina….….….….….….….….….….75.0….75.075.0
Australia….….20.0….….30.0–12.0–24.0–14.0….….….50.00
Belgium11.0
22.0

–11.4
–.9–20.7….ΔΔΔΔΔ50.0–50.083.00
Bolivia….….….….….….2.5….….3.0 Δ1.0 Δ2.0 Δ8.58.5 Δ
Brazil….….37.5….28.0
37.5

–65.5
65.5

–37.5
….….–28.037.5
54.8

–17.2
260.8112.5 Δ
Burma….….….….….….….….….15.0….….15.015.0
Chile8.8….….….–3.4–3.7
12.5

–1.7
….….–.2 Δ
31.1

–12.3
9.1 Δ61.540.2 Δ
Colombia….….….….….….….25.0….….
5.0 Δ

–5.0
10.0Δ40.0 Δ35.0 Δ
Costa Rica….1.2–.9–.3….….….….….….….….1.20
Cuba….….….….….….….….….12.5Δ
35.0

–22.5
25.0

–25.0
72.525.0
Czechoslovakia*….6.0….….….….….….–2.0*–.7*–.7*–.6*6.02.0*
Denmark3.46.8….….….….….….–10.2….34.0–25.544.28.5
Ecuador….….….….….….….….….….5.0–5.05.00
El Salvador….….….….….….….….….2.5–2.5Δ2.50 Δ
Ethiopia…..3.3–.3–.3….….….….….….…..60
Finland….….….….….4.5Δ
5.0

–2.0
–4.5Δ–3.0….….….9.50
France125.0….….….….….….–20.0–60.0–45.0262.5131.2518.8393.8
Haiti….….….….….….….….….….1.02.5 Δ3.53.5 Δ
Honduras….….….….….….….….….….
6.2

–2.5
–3.86.20
India….68.331.7….….….….–46.7–40.7–12.5200.0….300.0200.0
Indonesia….….….….….….….15.0….–15.0

55.0
….….70.055.0
Iran….….….….6.62.2….….
–8.7

17.5
–11.9

19.7
….–8.446.016.9
Israel….….….….….….….….….….3.8….3.83.8
Japan….….….….….….
124.6

–61.6
….–62.4….125.0–125.0249.00
Mexico22.5….….….–22.6….….22.5 Δ–22.4….….….45.00
Netherlands52.023.3….….….–27.3–48.0….….….68.8 Δ–68.8144.10
Nicaragua…..5–.5….….….….….….1.9 Δ
–1.9

3.8 Δ
–3.8 Δ6.10 Δ
Norway….9.6….….–9.6….….….….….….….9.60
Paraguay….….….….…..9….–.4….1.5
4.0 Δ

–.5
.8 Δ7.36.3 Δ
Peru….….….….….….….ΔΔΔΔ5.0 Δ5.05.0 Δ
Philippines….….….….….….….….10.05.0….….15.015.0
Sudan….….….….….….….….….….….5.05.05.0
Turkey5.0….….….….
10.0

–5.0
20.0–6.0–9.0….
13.5

–7.0
25.0

–8.0
73.538.5
U of S Africa….10.0….….–10.0….….….….….….36.2 Δ46.236.2 Δ
U Arab Rep: Egypt….….3.0–3.0….….….….….15.015.0….33.030.0
United Kingdom
240.0

–6.0
60.0….….–28.0….–157.6–108.3….561.5 ΔΔ–16.2Δ861.5545.3 Δ
Yugoslavia….….9.0….….….….….….….-9.022.931.922.9
Drawings468208101….35852.3062286939773293,2161,699
Currency Bought
Belgian francs….11.4….….….….….….….….….….11.4
Canadian dollars….….….….….….….….….15.0….….15.0
German marks….….….….….….4.4….….….….64.568.9
Guilders….….….….….….….….….….….5.05.0
Pounds sterling6.1….….….28.0….157.6….….….….16.2207.9
US dollars461.6196.6101.5….6.685.167.562.527.5677.6977.0243.72,907.3
Repayments–6–11–2–24–74–102–320–210–232–113–64–357–1,517
by Repurchases….….–2–24–46–102–163–210–232–113–64–336–1,292
by Others’ Drawings–6–11….….–28….–158….….….….–21–224
Net Drawings46219799–24–39–16–91–148–205579913–28

1,699
1,699
Drawings Outstanding4626587577336946785874392348141,727
Stand-bys Agreed55….62….1,0771832391,617
Drawn….522….21426206680
Expired….….….281489122
Amounts Available at End of Period555090621,117870815815 Δ
Members’ Repurchases on Subscription Account–6.4–.9–11.5–4.7–57.2–4.8–41.1–9.1….–135.7
Stand-By Arrangements(As of November 30, 1958. Amounts expressed in millions of U.S. dollars)
Amount Available
MemberDate of

Agreement
Expiration Date

of Agreement

or Renewal
Amount

Agreed
Dec 31

1952
Dec 31

1953
Dec 31

1954
Dec 31

1955
Dec 31

1956
Dec 31

1957
Nov 30

1958
Agreements in effect
BoliviaNov 1956Dec 19587.54.53.51.5
BrazilJune 1958June 195937.5
ChileApr 1956Mar 195935.035.016.27.2
ColombiaJune 1957June 195925.025.015.0
El SalvadorOct 1958Mar 19597.57.5
FranceJan 1958Jan 1959131.25
HaitiJuly 1958July 19595.02.5
NicaraguaSept 1958Mar 19597.57.5
ParaguayJuly 1957July 19595.52.01.2
PeruFeb 1958Feb 195925.020.0
Union of S. AfricaApr 1958Apr 195925.013.8
United KingdomDec 1956Dec 1958738.53738.5738.5738.5
Agreements expired or canceled
BelgiumJune 1952June 195750.050.050.050.050.050.0
CubaDec 1956June 195712.512.5
FinlandDec 1952June 19535.05.0
FranceOct 1956Oct 1957262.5262.5
HondurasNov 1957May 19583.75
IndiaMar 1957Mar 195872.5
IranMay 1956Nov 195617.5
MexicoApr 1954Oct 195550.027.5
NetherlandsSept 1957Mar 195868.7568.8
NicaraguaNov 1956May 19573.751.9
Oct 1957Apr 19587.53.8
PeruFeb 1954Feb 195812.512.512.512.512.5
Total1,616.5355.050.090.062.51,117.4870.3814.7
Balance Sheet(Amounts expressed in millions of U.S. dollars)
April 30April 30April 30April 30April 30April 30April 30April 30April 30Oct 31
1950195119521953195419551956195719581958
Gold (at 35 dollars per fine ounce)1,459.51,495.01,531.61,692.61,718.51,744.41,761.41,439.31,237.71,306.9
Investmentsa50.0200.0200.0200.0
Convertible Currencies1,395.21,409.71,582.01,638.31,774.01,974.32,119.91,333.91,069.11,088.6
Balances with Depositories125.1126.0107.1156.9167.8168.3226.5167.1175.2176.8
Demand Securitiesb1,270.01,283.71,475.01,481.41,606.21,802.41,892.01,175.2891.4911.9
Currency Adj. Rec. or Pay. (–)3.61.4–8.42.5–.1
Sub Total2,854.62,904.73,113.63,330.93,492.53,718.73,931.32,973.22,506.82,595.5
Non-Convertible Currencies4,153.54,219.14,161.24,340.24,458.54,325.43,986.15,129.65,686.55,653.3
Balances with Depositories620.6588.6696.3658.9688.8656.8572.8943.81,246.21,253.7
Demand Securitiesb3,533.03,630.43,464.93,681.33,769.73,669.03,413.34,185.84,431.24,399.2
Currency Adj. Rec. or Pay. (–)–.49.1.4
Subscriptions Receivable892.8906.5870.81,056.7888.8797.7814.5816.8898.4958.1
Withdrawing Member’s Currency3.63.02.32.0
Other Assets0.70.71.01.11.00.91.14.65.56.8
Total Assets=Total Liabilities7,918.08,031.08,146.68,728.98,840.88,842.78,736.68,927.29,099.69,215.7
Capital: Auth. Subscriptions: paid7,028.77,130.07,282.77,679.87,959.87,930.37,936.08,114.78,189.68,234.9
unpaid892.8906.5870.81,056.7888.8797.7814.5816.8898.4958.1
Cumulated Deficit (–)–3.8–5.7–7.2–8.0–8.0–10.5–14.2–6.3
Net Capital7,917.78,030.88,146.38,728.58,840.58,717.58,736.38,925.29,088.09,193.0
Withdrawing Member’s Subscription125.0
Reserves and Liabilities.3.2.3.4.3.2.32.011.622.7

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