chapter 1 Original Members

International Monetary Fund
Published Date:
October 1985
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The Atlantic Charter, promulgated on August 14, 1941, contemplated that the benefits of economic progress would be available to all countries. The United States and the United Kingdom undertook to “endeavor, with due respect for their existing obligations, to further the enjoyment by all States, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity.” In addition, they recorded their “desire to bring about the fullest collaboration between all nations in the economic field with the object of securing, for all, improved labor standards, economic advancement and social security.” 1

The Keynes Plan of February 11, 1942 contemplated that it would be possible to form an International Currency (or Clearing) Union that “substantially covers the world.” It would be “capable of wide, indeed of universal, extension as further countries become ready for it.” The United States and the United Kingdom would be “joint founder-States” and would have a “special position.” The British Commonwealth would be brought into the Union by the membership of the United Kingdom. “The position of Russia, which might be a third founder, if she can be a party to so capitalist-looking an institution, would need special consideration.” Some other countries would belong from the outset and others “as soon as they had established an internal organisation capable of sustaining the obligations of membership.” 2

This approach would have the great advantage that the United States and the United Kingdom (the former in consultation with the Pan-American countries and the latter with the other members of the British Commonwealth) could settle the charter and the main details of the new body without being subjected to the delays and confused counsels of an international conference. It would also mean that considerable progress could be made irrespective of the nature of the European political settlement and before the conditions of adherence of the European members could be finally determined. Moreover, membership would be thus established as a privilege only open to those who conformed to certain general principles and standards of international economic conduct. The management and the effective voting power might inhere permanently in the founder-States.3

A member would be entitled to withdraw, or could be compelled by the Governing Board to withdraw, on a year’s notice. Dependencies or members of a federal union, such as the French colonies, the separate states of the United States or of Australia, and “possibly” the British Crown Colonies, would not enjoy individual membership. Nonmembers would be able, and even encouraged, to keep accounts with the Union, but they would have no voice in its management.4

When the final version of the Keynes Plan was published (April 8, 1943), it was announced that it had been presented for examination of its technical aspects by experts of the U. S. Government, had been discussed with officials of the Governments of the Dominions and India and with representatives of the European Allies as well, and had been communicated to representatives of the other United Nations.5 The Plan proposed that all the United Nations be invited to become original members of the International Clearing Union, and that other states might be invited to join subsequently. If ex-enemy states were invited to join, special conditions might be applied to them.6 There was no longer any proposal that the United States and the United Kingdom should be assured of permanent control of the Union or should “settle the charter.” The examples of territories that would not enjoy separate membership were retained, but with an unqualified statement that the British Crown Colonies were among those territories.7

The first definitive version of the White Plan was dated April 1942 and bore the title Preliminary Draft Proposal for a United Nations Stabilization Fund and a Bank for Reconstruction and Development of the United and Associated Nations. This document expressed the hope that representatives of various interested governments might meet in conference soon to explore the possibility of developing a plan, and the Preliminary Draft Proposal was intended to assist such a committee.8 Under the Plan, any member of the United and Associated Nations would be eligible for membership in the Fund provided that the country agreed:

  • 1. To abandon, not later than one year after joining the Fund, or after the cessation of hostilities, whichever is later, all restrictions and controls over foreign exchange transactions with member countries, except with the approval of the Fund.
  • 2. To alter exchange rates on the currencies of other countries only with the consent of the Fund and only to the extent and in the direction approved by the Fund, with the exception of a narrow range fixed by the Fund and permitted to all member currencies.
  • 3. (a) Not to accept or permit deposits or investments from any member country except with the permission of the government of that country, and
    • (b) To make available to the government of any member country at its request all property in form of deposits, investments, securities of the nationals of that member country.
  • 4. Not to enter upon any bilateral clearing arrangements.
  • 5. Not to adopt any monetary or general price measure or policy, the effect of which, in the opinion of a majority of the member votes, would be to bring about sooner or later a serious disequilibrium in the balance of payments, if four-fifths of the member votes of the Fund submitted to the country in question their disapproval of the adoption of the measure.
  • 6. To embark upon a program of gradual reduction of existing trade barriers—import duties, import quotas, administrative devices—and further agree not to adopt any increase in tariff schedules, or other devices having as their purpose higher trade obstacles, without giving reasonable opportunity for the Fund to study the effect of the contemplated change on exchange rates and register its opinion. In rendering its opinion, the Fund will make recommendation to which the member governments agree to give serious consideration.
  • 7. Not to permit any defaults on foreign obligations of the government, Central Bank or government agency without approval of the Fund.
  • 8. Not to subsidize—directly or indirectly—the exportation of any commodity or services to member countries without consent of the Fund.9

The idea that a country had to accept certain obligations in order to be eligible for membership seems to have been the forerunner of the instrument in which a country joining the Fund must declare that it has accepted the Articles in accordance with its law and has taken all necessary steps to enable it to perform its obligations.10 The instrument relates to all the obligations inherent in membership, whereas the eight conditions of the White Plan were not the only obligations under the Plan.

There was no provision in the White Plan for membership by other countries. A member that defaulted in making any payment due to the Fund could be expelled, but there was no right of withdrawal.11 The commentary attached to the Plan emphasized that neither Russia nor any other country should be excluded from membership because of its economic structure.12

On March 4, 1943 the Secretary of the U. S. Treasury sent a draft of the White Plan to the ministers of finance of 37 countries, with an invitation to send experts to Washington to discuss it.13 The representatives in Washington of 46 countries were invited to discuss the Plan in May 1943. In June, U. S. officials held informal discussions with the representatives of 18 countries.14 The final version was circulated by the U. S. Treasury on July 10, 1943, after informal discussions with the representatives of “nearly 30 countries.” 15 The earlier reference to certain countries was retained by naming the Plan the Preliminary Draft Outline of a Proposal for an International Stabilization Fund of the United and Associated Nations.16 There were no specific provisions on membership, but provisions were included under which expulsion or withdrawal would become effective one year after initial action had been taken.17

The French Suggestions Regarding International Monetary Relations of May 1943 contemplated that the “principal nations … might conclude a monetary accord among themselves, to which the other United Nations might be invited to adhere, under certain conditions.” 18 The Tentative Draft Proposals of Canadian Experts for an International Exchange Union of July 12, 1943 contained no explicit reference to possible members.19

Discussions of the White Plan by the experts of many countries, but mainly the discussions between groups of British and American officials headed by Lord Keynes and Mr. White, led to the publication on April 21, 1944 of the Joint Statement by Experts on the Establishment of an International Monetary Fund. The preamble stated that governments were not asked to give final approval to the principles of the Joint Statement until they had been embodied in the form of definite proposals by the delegates of the United and Associated Nations meeting in formal conference. The principles of this document were the basis on which or around which draft provisions, often in numerous versions, were submitted at the Bretton Woods Conference after preparatory work was done at Atlantic City. The Joint Statement contained no provision that dealt specifically with membership, but it estimated that the Fund would have resources of about $8 billion if all the United and Associated Nations became members.20 A country that became a member would be able to withdraw by giving notice,21 but there was no mention of compulsory withdrawal.

On May 25 and 26, 1944 the U. S. Secretary of State sent invitations to 44 governments, including the French Committee of National Liberation, to send representatives to a conference at Bretton Woods, New Hampshire, beginning on July 1, 1944. Most of the countries that attended the Conference were United Nations. The original signatories of the Declaration of the United Nations of January 1, 1942, all of which attended the Conference, were Australia, Belgium, Canada, China, Costa Rica, Cuba, Czechoslovakia, Dominican Republic, El Salvador, Greece, Guatemala, Haiti, Honduras, India, Luxembourg, Netherlands, New Zealand, Nicaragua, Norway, Panama, Poland, South Africa, U. S. S. R., United Kingdom, United States, and Yugoslavia. The countries attending the Conference that adhered to the Declaration of the United Nations after January 1, 1942 and before July 1, 1944 were Bolivia, Brazil, Colombia, Ethiopia, Iran, Iraq, Liberia, Mexico, and Philippines. The remaining participants in the Conference were Associated Nations, i.e., countries that had not signed the Declaration and were not belligerents, but had broken relations with the Axis powers and were assisting the United Nations. These were Chile, Ecuador, Egypt, France, Iceland, Paraguay, Peru, Uruguay, and Venezuela.22 The Danish Minister to Washington, whose country could not participate formally in the Conference because it had no government-in-exile, was invited to attend in a personal capacity.23 A limited group of countries was invited to send representatives to a preparatory conference at Atlantic City in the latter half of June 1944, and experts from 17 countries attended.24

The provision of the Joint Statement that dealt with subscriptions and the potential size of the Fund’s resources declared that “[m]ember countries shall subscribe in gold and in their local funds amounts (quotas) to be agreed, which will amount altogether to about $8 billion if all the United and Associated Nations subscribe to the Fund (corresponding to about $10 billion for the world as a whole).”25 On the basis of this provision, the United States and the United Kingdom submitted the following joint proposal:

Countries Eligible for Membership

The members of the Fund shall be those of the countries represented at the United Nations Monetary and Financial Conference whose governments accept membership in the Fund.

Membership in the Fund shall be open to other countries at such times and in accordance with such terms as may be prescribed by the Fund.26

The major difference between this proposal and the text as adopted is that the proposal would have entitled the countries represented at the Bretton Woods Conference to membership at any time without any opportunity for the Fund to prescribe terms, whereas under the final text this privilege expired on a particular date.

During discussion of the proposed provision it was pointed out that there was a defect in drafting, which could be cured, however, by inserting some such expression as “original” or “founder” to qualify the members referred to in the first sentence.27 The Drafting Committee recommended that “at the outset” should precede the first sentence, and “subsequently” the second,28 but the solution was the insertion of “original” in the first sentence. Article II was agreed in the following form:

Section 1. Original members

The original members of the Fund shall be those of the countries represented at the United Nations Monetary and Financial Conference whose governments accept membership before the date specified in Article XX, Section 2 (e).

Section 2. Other members

Membership shall be open to the governments of other countries at such times and in accordance with such terms as may be prescribed by the Fund.

The countries represented at the Conference are set forth in Schedule A in the following form:

SCHEDULE A QUOTAS(In millions of United States dollars)
Costa Rica5
Denmark **
Dominican Republic5
El Salvador2.5
New Zealand50
Philippine Commonwealth15
Union of South Africa100
Union of Soviet Socialist Republics1200
United Kingdom1300
United States2750

The quota of Denmark shall be determined by the Fund after the Danish Government has declared its readiness to sign this Agreement but before signature takes place.

The quota of Denmark shall be determined by the Fund after the Danish Government has declared its readiness to sign this Agreement but before signature takes place.

The Articles provide for the Agreement to remain open for signature on behalf of the governments of these countries until December 31, 1945, and after that date to “be open for signature on behalf of the government of any country whose membership has been approved in accordance with Article II, Section 2.” 29 The Agreement was to enter into force when it had been signed on behalf of governments having 65 per cent of the total of quotas set forth in Schedule A and when instruments of acceptance had been deposited on their behalf, but in no event was the Agreement to become effective before May 1, 1945 or after December 31, 1945.30

The countries in Schedule A that had suffered the occupation of their metropolitan territories by the enemy received a special concession in connection with the deposit of the instrument of acceptance, although this concession did not affect the provision for entry into force of the Agreement. They were permitted to delay the deposit of their instruments until 180 days after the date on which their territories had been liberated. If any one of them did not make the deposit, the signature of the Articles on its behalf was to become void.31

The possible membership of particular countries was the subject of special discussion at the Conference. The Norwegian delegation proposed a resolution in which the Conference would record its opinion that neither Germany nor Japan should be admitted to membership in the Fund or in the International Bank for Reconstruction and Development32 until the country in question had been admitted to the political world organization that was planned.33 The proposal was rejected, as was a proposal that the Articles should provide that the government of a country should not be eligible for membership in the Fund as long as the central bank of that country had not taken the necessary steps to foster the liquidation of the Bank for International Settlements.34

Entry into Force of Articles

The Articles were to enter into force when countries listed in Schedule A with quotas totaling the equivalent of at least $5,720 million completed the necessary steps.35 This event occurred on December 27, 1945, with the completion of the necessary steps by 22 countries with quotas totaling the equivalent of $6,772.5 million: Belgium, Bolivia, Canada, China, Colombia, Czechoslovakia, Egypt, Ethiopia, France, Greece, Honduras, Iceland, India, Iraq, Luxembourg, Netherlands, Norway, Philippines, South Africa, United Kingdom, United States, and Yugoslavia. In addition, the following 8 countries became members before the end of the year: Dominican Republic, Ecuador, Guatemala, and Paraguay on December 28, Iran on December 29, and Chile, Mexico, and Peru on December 31. Only these 30 countries, therefore, can be regarded as original members of the Fund.

All but one of the other countries listed in Schedule A, the U. S. S. R., became members of the Fund in due course. Five countries that had signed the Articles on or before December 31, 1945 became members upon depositing instruments of acceptance on or before March 14, 1946: Costa Rica on January 8, 1946, Poland on January 10, 1946, Brazil on January 14, 1946, Uruguay on March 11, 1946, and Cuba on March 14, 1946. The Board of Governors resolved on March 14, 1946, during its inaugural meeting at Savannah, Georgia, that membership was approved under Article II, Section 2, for all other countries listed in Schedule A on the acceptance of membership by their governments in accordance with the provisions of Article XX not later than December 31, 1946.36 These countries, as well as the 5 referred to above, were permitted to join the Fund, therefore, without the prescription of any terms under Article II, Section 2, other than those that had applied to original members under the Articles, but they cannot be regarded as original members even though they entered the Fund on the same basis as original members. The following 5 countries listed in Schedule A became members in accordance with the resolution: El Salvador, Nicaragua, and Panama on March 14, 1946, Denmark on March 30, 1946, and Venezuela on December 30, 1946.

The rest of the countries listed in Schedule A, apart from the U. S. S. R., became members in accordance with individual resolutions of the Board of Governors adopted pursuant to Article II, Section 2: Australia on August 5, 1947, Haiti on September 8, 1953, New Zealand on August 31, 1961, and Liberia on March 28, 1962.

1United States: 77th Cong., 1st Sess., 55 Stat. 1603 (1942). United Kingdom: Cmd. 6321 (1941) and Cmd. 6511 (1944).
2The International Monetary Fund, 1945–1965: Twenty Years of International Monetary Cooperation, by J. Keith Horsefield and others (Washington, 1969), Vol. III, pp. 3, 10, 15. (Hereinafter referred to as History.)
3Ibid., p. 15. On the attitudes of the United States and the United Kingdom to a formal international conference, see John Morton Blum, From the Morgenthau Diaries: Years of War, 1941–1945 (Boston, 1967), pp. 233–34. (Hereinafter referred to as Blum, Morgenthau Diaries, 1941–45.)
4History, Vol. III, pp. 11, 16. Cf. “other holders” of special drawing rights under Article XXIII, Section 3. (The Articles of Agreement of the Fund are reproduced in Appendix VIII below.)
5Proceedings and Documents of the United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1–22, 1944 (Department of State Publication 2866, International Organization and Conference Series I, 3, Washington, 1948), p. 1548. (Hereinafter referred to as Procs. and Docs.)The composition of the United and Associated Nations is explained below, p. 13.
6History, Vol. III, p. 22.
7Ibid., p. 30.
8Ibid., pp. 39–40. On July 21, 1942 the decision was taken in the United States to inform friendly governments that U. S. technical experts were examining the possibility of establishing a Fund and a Bank, and to have representatives of the Treasury and State Departments initiate exploratory discussions with spokesmen for the United Kingdom, the Soviet Union, China, Canada, Australia, Brazil, and Mexico.—Blum, Morgenthau Diaries, 1941–45, p. 234.
9History, Vol. III, p. 44.
10See Article XX, Section 2 (a). A similar term is used in membership resolutions.
11History, Vol. III, p. 45.
12Ibid., pp. 72–73.
13History, Vol. I, p. 31. Procs. and Docs., p. 1574. The 37 countries to which the letter was sent were Australia, Belgium, Bolivia, Brazil, Canada, Chile, China, Colombia, Costa Rica, Cuba, Czechoslovakia, Dominican Republic, Ecuador, El Salvador, Ethiopia, Greece, Guatemala, Haiti, Honduras, India, Iraq, Luxembourg, Mexico, Netherlands, New Zealand, Nicaragua, Norway, Panama, Paraguay, Peru, Poland, South Africa, U. S. S. R., United Kingdom, Uruguay, Venezuela, and Yugoslavia.
14Australia, Belgium, Brazil, Canada, China, Czechoslovakia, Ecuador, Egypt, France, Luxembourg, Netherlands, Norway, Paraguay, Philippines, Poland, U. S. S. R., United Kingdom, and Venezuela.—History, Vol. I, p. 31.
15History, Vol. III, p. 83.
16Ibid. One reflection of the emphasis on the United Nations was the provision in this version of the plan for a new international monetary unit to be called Unitas, with the symbol UN. “The large significance of the Unitas lay in its sound, derived from ‘United Nations’ so as to contrast to ‘bancor’ [in the Keynes Plan] with its tones of Lombard and Wall Streets.”—Blum, Morgenthau Diaries, 1941–45, p. 237.
17History, Vol. III, p. 95.
18Ibid., p. 99.
19Ibid., pp. 103–18.
20Ibid., pp. 131–32.
21Ibid., p. 134.
22Ruth B. Russell, A History of the United Nations Charter: The Role of the United States, 1940–1945 (Washington, 1958), p. 508. (Hereinafter referred to as Russell, History of UN Charter.) Neutrals (Argentina, Portugal, Spain, Sweden, and Switzerland) were not invited to the Conference.
23Ibid. See also Procs. and Docs., p. 101.
24Australia, Belgium, Brazil, Canada, Chile, China, Cuba, Czechoslovakia, France, Greece, India, Mexico, Netherlands, Norway, U. S. S. R., United Kingdom, and United States.—History, Vol. I, pp. 79–80.
25Procs. and Docs., p. 1631. History, Vol. III, pp. 131–32.
26Procs. and Docs., pp. 24–25.
27Ibid., p. 150.
28Ibid., pp. 231, 338, 342; see also pp. 446, 519, 658.
29Article XX, Section 2 (e) and (f). Under Article XX, Section 2(d), at the time each original member signed the Articles it was required to transmit to the Government of the United States in gold or U. S. dollars, for deposit in a special account, 1/100 of 1 per cent of its total subscription for the purpose of meeting the administrative expenses of the Fund. Certain other members also were required to make this payment; see p. 191 below.
30Article XX, Sections 1 and 2 (e) and (f).
31Article XX, Section 2 (h).
32Referred to hereinafter as the World Bank or the Bank.
33Procs. and Docs., pp. 331–32, 1167.
34Ibid., p. 1191.
35References to dollars here, and throughout the book, are to U. S. dollars of the weight and fineness in effect on July 1, 1944.
36Resolution No. IM-9, International Monetary Fund, Selected Documents, Board of Governors, Inaugural Meeting (Washington, 1946), p. 21.

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