Abstract

This paper reviews key findings of the IMF’s Annual Report for the fiscal year ended April 1949. The report highlights that the unbalanced conditions that have characterized the world economic situation since the end of the war still prevail. In many countries, there remains a striking discrepancy between demand and productive capacity, and an even greater discrepancy between the need for imports and capacity to pay for them. Until effective measures are taken to meet these closely related problems, there can be little hope of achieving the expansion of world trade on a multilateral basis.

APPENDICES

APPENDIX I STATEMENT ON CHANGE IN THE PAR VALUE OF THE COLOMBIAN PESO

(Press Release of December 17, 1948)

The Government of Colombia has proposed, and the International Monetary Fund has concurred in, the change of the par value of the Colombian currency from the previous rate of approximately 1.75 pesos to the U.S. dollar to approximately 1.95 pesos to the U.S. dollar. The change in par value will be accompanied by certain modifications in the existing multiple currency system of Colombia, which should have the effect of curbing imports and thereby tend to lessen the drain on Colombia’s foreign exchange reserves. The measures should assist in the solution of Colombia’s balance of payments and exchange problems and will remove some of the features of the existing system which had been deemed to be in conflict with the policies of the Fund, such as the export premium on basic export commodities.

Colombia and the Fund will continue consultations with a view to the adoption of measures in the financial and monetary field designed to lead toward further unification, simplification and strengthening of the exchange system.

APPENDIX II STATEMENT ON CHANGE IN THE PAR VALUE OF THE CURRENCY OF FRENCH SOMALILAND

(Press Release of March 22, 1949)

The International Monetary Fund today announced its concurrence in a proposal by the Government of France to change the par value of the currency of French Somaliland. The new par value of the Djibouti franc is: one franc equals 0.00414507 gram of fine gold, which, expressed in terms of U.S. dollars, is Djibouti francs 214.392 per U.S. dollar.

The par value for this currency which was initially established in agreement with the Fund was 70 Djibouti francs per U.S. dollar. When the Government of France instituted its new exchange system on January 25, 1948, the exchange rate of the Djibouti franc was fixed at 126 to the U.S. dollar.

The parities for the Djibouti franc in terms of gold and in terms of U.S. dollars are:

  • (1) 0.00414507 gram of fine gold per Djibouti franc

  • (2) 7,503.73 Djibouti francs per troy ounce of fine gold

  • (3) 214.392 Djibouti francs per U.S. dollar

  • (4) 0.466435 U.S. cents per Djibouti franc.

The new Djibouti franc will be freely convertible into dollars. Exchange restrictions will be abolished in French Somaliland.

APPENDIX III STATEMENT ON REVISIONS IN THE EXCHANGE SYSTEM OF COLOMBIA

(Press Release of June 16, 1948)

The International Monetary Fund today released the following statement on the exchange system revisions recently announced by the Colombian Government.

At its meeting of June 11th, the International Monetary Fund, at the request of the Colombian Government, considered the revisions of Colombia’s exchange system, which included, among other things, provision for a system, of exchange taxes on imports and exchange premia for exports and was intended to meet the present monetary situation in Colombia.

Note was taken by the Fund, in considering the matter, of the emphasis laid by Colombia on the temporary nature of the newly announced regulations.

The Fund, however, has withheld its approval of the proposal, since, in its present form, it contains features which are in conflict with the policies of the Fund. Colombia has asked for further consultation with the Fund, looking toward finding other ways of meeting her problems which would be acceptable to the Fund, and the Fund has agreed to such consultation.

APPENDIX IV STATEMENT ON CHANGES IN THE EXCHANGE SYSTEM OF FRANCE

(Press Release of October 16, 1948)

The Managing Director of the Fund today announced that the French Government has consulted the Fund on changes which it proposes to make in the French exchange system in order to reduce the multiplicity of exchange rates and to unify the procedure applicable to commercial transactions.

In summary, the proposals are:

(1) All trade transactions in dollars, Swiss francs and escudos will take place on the basis of the average of the French official rate of 214 to the dollar (or the equivalent for other currencies) and the “free” market rate in Paris.

(2) The “free” market rate will continue to be applicable to nontrade transactions in dollars, Swiss francs and escudos.

(3) Transactions in other currencies will be effected at rates corresponding to average rates for the dollar as determined under (1) above.

The new exchange system does not result in the establishment of a new official par value for the franc. However, the Fund considers that the proposals constitute a significant step toward restoring a unitary exchange system for France.

The new exchange system differs in important respects from that introduced by France in January 1948. At that time one of the main objections of the Fund was directed against what it considered the disorderly cross rates involved in this system. Since then the Fund and France have worked together to seek a modification of these exchange practices in order to meet French needs within the framework of the Fund Agreement. As a result of such consultations, various measures were introduced in recent months which have already resulted in some simplification in the French exchange system.

With the adoption of the new proposals, differential exchange rates for trade transactions of France will be eliminated. All such transactions will be based on the effective rate for the dollar, and the cross rates for the currencies of other members will conform closely with the parities agreed with the Fund. Differential rates will still continue only for financial transactions in dollars, Swiss francs and escudos.

The Fund welcomes this evidence of the desire of the French Government to restore an orderly system of exchange rates in fulfillment of the principles agreed at Bretton Woods. While the French Government has not proposed to the Fund the fixing of a new par value which would govern all transactions, it has stated to the Fund that its objective remains the agreement of a new and stable parity as soon as conditions permit. It is the intention of the Fund and of France to continue consultations for this purpose.

Note: The system described in (3) above was not applied to the lira. The lira rate stood at 220 lire = 100 francs, subject to revision in accordance with variations in the dollar rates on the official free markets in Paris and in Rome. In March 1949 the basic rate was changed from 220 lire to 180 lire = 100 francs, the provision for revision remaining as before.

As from June 10, 1949, “free” market arrangements were also applied in France to the Belgian franc on the same lines as had been already applied to transactions in United States dollars, Swiss francs, and Portuguese escudos (see (see Annual Report for 1948, pp. 37-38).

APPENDIX V STATEMENT ON REVISIONS IN THE EXCHANGE SYSTEM OF PERU

(Press Release of September 7, 1948)

The Government of Peru has been consulting with the International Monetary Fund regarding measures which that Government proposes to take with a view to restoring its international payments position. Peru has been faced with a difficult problem of limiting imports because of domestic inflation and of maintaining exports because of rising domestic costs. The measures proposed by the Government of Peru include the creation of a surcharge on imports of non-essential and luxury goods to reduce the demand for foreign exchange and to obtain a revenue which will be used to repay the Government’s debt to the Central Bank and to avoid the necessity for inflationary borrowing. Exporters will be given a higher return, thus encouraging an expansion of exports.

These proposed measures will add to the number of effective exchange rates in Peru. It is the expectation of the Government of Peru that these measures will give it time to take the further steps necessary to stabilize the financial situation and to balance Peru’s international payments with a unified exchange system.

After careful consideration the Fund has approved the proposals with certain recommendations which the Fund understands the Government of Peru will follow. At the same time, the Fund has emphasized that the exchange measures can be effective only if they are accompanied by determined efforts on the part of the Government of Peru to halt inflation, to secure additional revenue from sources other than exchange taxes, and to limit the expansion of bank credit.

The consultations between Peru and the Fund have been conducted in a spirit of complete cooperation and will continue with a view to achieving the desired aim of financial stability and unification of the exchange system as soon as possible.

The exchange measures are put into effect through a decree which is being issued in Lima, Peru today.

APPENDIX VI STATEMENT BY THE MANAGING DIRECTOR ON CONSULTATIONS WITH THE UNION OF SOUTH AFRICA

(Press Release of May 11, 1949)

I came to Capetown at the invitation of the South African Government primarily to discuss questions relating to the sale of semi-processed gold. As has been made clear on previous occasions, the policy of the International Monetary Fund is to prevent sales of gold in this form from becoming a means of feeding the demand for gold for hoarding purposes and thus diminishing the production of newly mined gold which finds its way into monetary reserves. The Fund is also concerned about the fact that an increasing amount of gold in premium markets serves to aggravate the difficulties of countries that are trying to prevent the illicit import of gold into their territories.

Our discussions have taken place in a very cordial atmosphere, and I have been impressed by the evident desire of the South African Government to reach an agreement with the Fund on the methods of achieving the policy referred to, while at the same time permitting the South African gold mining industry to have a share in the legitimate business in semi-fabricated gold.

As a result of our discussions, certain safeguards will be adopted to secure that semi-fabricated gold is sold only to manufacturers for purposes of genuine manufacture and that the importer of the gold has the prior permission of his own authorities to make the purchase for this purpose. Moreover, the South African Government will keep a careful watch on the business and will reserve the right to decline permission for export in any case in which they are not satisfied that the demand is for the purpose of genuine manufacture.

Certain safeguards will also be adopted in the case of the manufacture in South Africa of gold articles for export in order to avoid such articles becoming a device solely for feeding the markets which the Fund desires to limit.

The Fund will of course continue to keep this whole matter of premium gold sales under review with all its members.

APPENDIX VII MEMBERSHIP, QUOTAS, GOVERNORS, AND VOTING POWER

as of April 30, 1949

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Voting power varies on certain matters with use by members of Fund resources.

These figures do not add to 100% because of rounding.

APPENDIX VIII CHANGES IN MEMBERSHIP OF THE BOARD OF GOVERNORS

Changes in the membership of the Board of Governors between May 1, 1948, and April 30, 1949, have been as follows:

Gustavo Del Vecchio succeeded Luigi Einaudi as Governor for Italy May 27, 1948.

Yun-wu Wang succeeded O. K. Yui as Governor for China July 6, 1948.

Octavio Vallarino succeeded Ernesto Jaen Guardia as Governor for Panama July 15, 1948.

Jozef Goldmann succeeded J. V. Mladek as Governor for Czechoslovakia August 9, 1948.

Ladislav Biel succeeded Julius Pazman as Alternate Governor for Czechoslovakia August 9, 1948.

N. J. O. Makin succeeded J. B. Brigden as Alternate Governor for Australia August 17, 1948.

Ambrosio Alvarez Aybar succeeded Luis Julian Perez as Alternate Governor for the Dominican Republic September 2, 1948.

Aquilino Vallarino succeeded Roberto Heurtematte as Alternate Governor for Panama September 2, 1948.

Miguel Cuaderno succeeded Narciso Ramos as Alternate Governor for the Philippine Republic September 13, 1948.

Dragoslav Avramovic succeeded Lavoslav Dolinsek as Alternate Governor for Yugoslavia September 14, 1948.

Hans Rizzi appointed as Governor for Austria September 14, 1948.

Franz Stoeger-Marenpach appointed as Alternate Governor for Austria September 14, 1948.

Ahmed Izzet Mohammed succeeded Ali Jawdat as Governor for Iraq September 18, 1948.

Amin Mumayiz succeeded A. M. Gailani as Alternate Governor for Iraq September 18, 1948.

Carlos Novoa succeeded Antonio Espinosa de los Monteros as Governor for Mexico September 20, 1948.

Pedro L. Nunez succeeded Homero Viteri Lafronte as Alternate Governor for Ecuador September 20, 1948.

Hector Ormachea Zalles succeeded Rene Ballivian Calderon as Governor for Bolivia September 21, 1948.

N. J. O. Makin appointed as Governor for Australia September 22, 1948.

S. G. McFarlane appointed as Alternate Governor for Australia September 22, 1948.

Octavio Paranagua succeeded Edgard de Mello as Alternate Governor for Brazil September 23, 1948.

J. B. Chifley appointed as Governor for Australia October 11, 1948.

N. J. O. Makin appointed as Alternate Governor for Australia October 11, 1948.

The appointment of Obren Blagojevic as Governor for Yugoslavia was terminated December 1, 1948.

Kan Hsu succeeded Yun-wu Wang as Governor for China December 29, 1948.

Wilfrid Baumgartner succeeded Emmanuel Monick as Alternate Governor for France January 19, 1949.

J. J. Gonzalez Gorrondona succeeded Carlos A. D’Ascoli as Governor for Venezuela March 17, 1949.

Felix Miralles succeeded Jose Antonio Mayobre as Alternate Governor for Venezuela March 17, 1949.

Klaus Waris succeeded Ralf Torngren as Alternate Governor for Finland March 18, 1949.

APPENDIX IX EXECUTIVE DIRECTORS AND VOTING POWER

as of April 30, 1949

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Voting power varies on certain matters with use by members of Fund resources.

These figures do not add to 100% because of rounding.

APPENDIX X CHANGES IN MEMBERSHIP OF THE EXECUTIVE BOARD

Changes in the membership of the Executive Board between May 1, 1948, and April 30, 1949, have been as follows:

George F. Luthringer resigned as Alternate Executive Director to A. N. Overby, effective July 2, 1948.

P. P. Schweitzer resigned as Alternate Executive Director to Jean de Largentaye July 15, 1948.

Bernard de Margerie was appointed Alternate Executive Director to Jean de Largentaye, succeeding P. P. Schweitzer, October 1, 1948.

J. V. Mladek resigned as Executive Director for Czechoslovakia, Poland and Yugoslavia October 17, 1948.

Henry J. Tasca was appointed Alternate Executive Director to A. N. Overby October 21, 1948.

Hubert Ansiaux, Executive Director for Belgium, Iceland and Luxembourg, completed his term of office October 31, 1948.

Rodrigo Gomez, Executive Director for Colombia, Costa Rica, Cuba, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico and Nicaragua, completed his term of office October 31, 1948.

J. V. Joshi resigned as Executive Director for India October 31, 1948.

Francisco Alves dos Santos-Filho, Executive Director for Bolivia, Brazil, Chile, Ecuador, Panama, Paraguay, Peru and Uruguay, completed his term of office October 31, 1948.

J. W. Beyen completed his term of office as Executive Director representing the Netherlands and the Union of South Africa October 31, 1948, and was elected Executive Director by the Netherlands and Norway, effective November 1, 1948.

Willem Koster was reappointed Alternate Executive Director to J. W. Beyen November 1, 1948.

Guido Carli completed his term of office as Executive Director representing Denmark, Italy, Turkey and Venezuela October 31, 1948, and was elected Executive Director by Austria, Greece and Italy, effective November 1, 1948.

Giorgio Cigliana-Piazza was reappointed Alternate Executive Director to Guido Carli November 1, 1948.

Carlos A. D’Ascoli was elected Executive Director by Colombia, Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, Mexico, Panama and Venezuela, effective November 1, 1948.

Eduardo Montealegre was appointed Alternate Executive Director to Carlos A. D’Ascoli November 1, 1948.

B. K. Madan, formerly Alternate Executive Director, was appointed Executive Director for India, succeeding J. V. Joshi, November 1, 1948.

D. S. Savkar was appointed Alternate Executive Director to B. K. Madan November 1, 1948.

S. G. McFarlane completed his term of office as Executive Director representing Australia, Lebanon and Syria October 31, 1948, and was elected Executive Director by Australia and the Union of South Africa, effective November 1, 1948.

Roland Wilson was appointed Alternate Executive Director to S. G. McFarlane November 1, 1948.

Octavio Paranagua, formerly Alternate Executive Director, was elected Executive Director by Bolivia, Brazil, Chile, Dominican Republic, Honduras, Nicaragua, Paraguay, Peru and Uruguay, effective November 1, 1948.

Louis Rasminsky completed his term of office as Executive Director representing Canada and Norway October 31, 1948, and was elected Executive Director by Canada and Iceland, effective November 1, 1948.

J. F. Parkinson was reappointed Alternate Executive Director to Louis Rasminsky November 1, 1948.

Ahmed Zaki Bey Saad completed his term of office as Executive Director representing Egypt, Ethiopia, Greece, Iran, Iraq and the Philippine Republic October 31, 1948, and was elected Executive Director by Egypt, Ethiopia, Iran, Iraq, Lebanon, Philippine Republic, Syria and Turkey, effective November 1, 1948.

Mahmoud Saleh El Falaki was reappointed Alternate Executive Director to Ahmed Zaki Bey Saad November 1, 1948.

Ernest de Selliers, formerly Alternate Executive Director, was elected Executive Director by Belgium, Denmark and Luxembourg, effective November 1, 1948.

Bohumil Sucharda was elected Executive Director by Czechoslovakia, Finland, Poland and Yugoslavia, effective November 1, 1948.

Mihailo Kolovic was appointed Alternate Executive Director to Bohumil Sucharda November 1, 1948.

Thomas Basyn served as Temporary Alternate Executive Director to Hubert Ansiaux between July 22, 1948 and October 29, 1948, and to Ernest de Selliers between November 1, 1948 and February 25, 1949.

Yueh-Lien Chang resigned as Alternate Executive Director to Y. C. Koo December 31, 1948.

Tsoo Whe Chu was appointed Alternate Executive Director to Y. C. Koo, succeeding Yueh-Lien Chang, January 2, 1949.

Eduardo Montealegre resigned as Alternate Executive Director to Carlos A. D’Ascoli January 31, 1949.

Hector Santaella was appointed Alternate Executive Director to Carlos A. D’Ascoli, succeeding Eduardo Montealegre, February 1, 1949.

A. N. Overby resigned as Executive Director for the United States February 8, 1949.

Frank A. Southard, Jr., was appointed Executive Director for the United States, succeeding A. N. Overby, February 8, 1949.

Roland Wilson resigned as Alternate Executive Director to S. G. McFarlane February 28, 1949.

J. M. Garland was appointed Alternate Executive Director to S. G. McFarlane, succeeding Roland Wilson, March 1, 1949.

Walter Blomeyer was appointed Alternate Executive Director to Octavio Paranagua April 1, 1949.

Willem Koster resigned as Alternate Executive Director to J. W. Beyen May 1, 1949.

APPENDIX XI EXCHANGE OF LETTERS BETWEEN THE FUND AND THE CONTRACTING PARTIES TO THE GENERAL AGREEMENT ON TARIFFS AND TRADE

Palais des Nations

GENEVE

9 September 1948

The Managing Director,

International Monetary Fund,

1818 “H” Street,

Washington 6, D. C,

U.S. A.

Dear Sir,

The General Agreement on Tariffs and Trade, which has now been put into provisional application by all but one of the countries participating in the negotiation thereof, provides in paragraph 1 of Article XV as follows:

“The CONTRACTING PARTIES shall seek co-operation with the International Monetary Fund to the end that the CONTRACTING PARTIES and the Fund may pursue a co-ordinated policy with regard to exchange questions within the jurisdiction of the Fund and questions of quantitative restrictions and other trade measures within the jurisdiction of the CONTRACTING PARTIES.”

Throughout the Agreement various provisions call for consultation or agreement between the CONTRACTING PARTIES, that is, the contracting parties to the General Agreement acting jointly, and the International Monetary Fund on matters of common concern. In particular, paragraph 2 of Article XV calls for a wide range of consultation, and paragraph 3 of Article XV provides:

“The CONTRACTING PARTIES shall seek agreement with the Fund regarding procedures for consultation under paragraph 2 of this Article.”

In view of the fact that the General Agreement on Tariffs and Trade has been given only provisional rather than definitive application, it is the view of the CONTRACTING PARTIES that an elaborate agreement to implement paragraph 3 quoted above is not necessary at this time. However, questions may arise in the interim which would require the CONTRACTING PARTIES to seek the co-operation of the Fund.

Under such circumstances it is proposed by the CONTRACTING PARTIES that the Fund agree to co-operate with the CONTRACTING PARTIES in carrying out the provisions of the General Agreement in accordance with the terms thereof and, in particular, to consult, at the request of the CONTRACTING PARTIES, on matters as contemplated by the General Agreement. If such cases arise, the Chairman of the CONTRACTING PARTIES will notify the Managing Director of the Fund of each particular instance in which the CONTRACTING PARTIES desire consultation and will furnish the Fund with all information available which may assist the Fund in considering the question. Since various provisions of the General Agreement call for consultation between the CONTRACTING PARTIES and the Fund, it might be necessary in particular cases to await a meeting of the contracting parties before formal consultation could be undertaken. However, the CONTRACTING PARTIES have authorized their Chairman to initiate requests, either at the direction of the CONTRACTING PARTIES or on the Chairman’s own initiative if the contracting parties are not in session, for the Fund to consult with the CONTRACTING PARTIES in accordance with the provisions of the General Agreement. This arrangement should make it possible for the Fund to undertake with a minimum of delay such studies as may be necessary and should afford the Fund opportunity to become familiar with the subject matter involved in advance of consultation with the CONTRACTING PARTIES in particular cases.

The Fund may from time to time wish to request consultation with the CONTRACTING PARTIES on matters of common interest, and, in such cases, the CONTRACTING PARTIES will be prepared to consult upon such requests.

Any request for consultation by either the Fund or the CONTRACTING PARTIES shall be accompanied by available information which would contribute to the effectiveness of the consultation. In such cases, due regard shall be paid to the need to safeguard confidential information and to any special obligations of the Fund and the CONTRACTING PARTIES in this respect.

The particular procedures in implementation of these arrangements can be worked out case by case until sufficient experience has been acquired on the basis of which more formal procedures can be developed if necessary.

If the foregoing arrangements are acceptable to the Fund, a reply to that effect would be appreciated.

Yours faithfully,

/s/

L. D. Wilgress

Chairman of the Contracting Parties

to the General Agreement on Tariffs

and Trade

International Monetary Fund

September 28, 1948

Dear Sir:

I beg to acknowledge receipt of your letter of September 9, 1948, concerning the future cooperation between the International Monetary Fund and the CONTRACTING PARTIES to the General Agreement on Tariffs and Trade in carrying out the provisions of the General Agreement.

The Fund agrees with you that an elaborate agreement on cooperation is not necessary at this time and that this informal arrangement of an administrative character constitutes a satisfactory basis for consultation and cooperation between the International Monetary Fund and the CONTRACTING PARTIES.

I take pleasure in agreeing on behalf of the International Monetary Fund to the provisions of your letter of September 9, 1948.

Yours faithfully,

/s/

Gutt

Managing Director

Mr. L. D. Wilgress

Chairman of the Contracting Parties

to the General Agreement on Tariffs and Trade

European Office of the United Nations

Palais des Nations

Geneva, Switzerland

APPENDIX XII STATEMENT ON TECHNICAL ASSISTANCE FOR ECONOMIC DEVELOPMENT OF UNDER-DEVELOPED COUNTRIES

(Press Release of June 2, 1949)

In a joint statement released at Lake Success today, nine international agencies set forth a cooperative, expanded program of technical assistance for economic development of underdeveloped countries. Six of these agencies estimate that their part of the program might run to $35.9 million the first year and $50.1 million the second year.

The International Monetary Fund, while participating actively in this program, does not expect to ask for any special funds from its member governments to carry on its plans for technical assistance. Those activities will be a continuation and intensification of already existing Fund programs and will be financed out of the Fund’s income and existing resources.

A major part of the Fund’s work over the course of its three-year existence has been in the field of technical assistance, in providing advice to and in consultation with its members. During this period, forty of its forty-eight member countries have received visits from Fund technical experts, Fund missions or officials from its Board or staff. These visits have been, in some cases, for the purpose of gathering information, but in many cases have also assisted in analyzing a country’s monetary and exchange difficulties and have recommended steps to meet those difficulties. On some occasions, Fund missions have helped government officials draft legislation or administrative regulations aimed at correcting conditions.

In view of the confidential relations with member countries, there has seldom been any publicity given to these visits at the time. However, it was made known today that Fund missions and experts have in the past visited, among others, such countries as Brazil, Chile, China, Colombia, Czechoslovakia, Ecuador, India, Lebanon, Mexico, Netherlands, Nicaragua, Norway, Peru, Syria and South Africa.

The Fund’s budget last year was approximately $4 million, a large part of which was spent in support of its program for technical assistance. It proposes in the current and future years to increase these activities as the availability of trained technical personnel permits.

APPENDIX XIII REPURCHASE OBLIGATIONS

Executive Board Decision No. 419-1

Subject: Repurchase Obligations—Article V, Section 7(c)

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 repurchase obligations are calculated.

Executive Board Decision No. 447-5

Subject: Repurchase Obligations—Article V, Section 7(b)(i) or (ii)

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. Members shall be informed of the foregoing.

APPENDIX XIV LETTER TO MEMBERS ON UNENFORCEABILITY OF EXCHANGE CONTRACTS

The Fund has addressed the following letter to its members relating to Article VIII, Section 2 (b) of the Articles of Agreement:

June 14, 1949

Dear Sir:

The Board of Executive Directors of the International Monetary Fund has interpreted, under Article XVIII of the Articles of Agreement, the first sentence of Article VIII, Section 2 (b), which provision reads as follows:

“Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member.”

The meaning and effect of this provision are as follows:

  1. Parties entering into exchange contracts involving the currency of any member of the Fund and contrary to exchange control regulations of that member which are maintained or imposed consistently with the Fund Agreement will not receive the assistance of the judicial or administrative authorities of other members in obtaining the performance of such contracts. That is to say, the obligations of such contracts will not be implemented by the judicial or administrative authorities of member countries, for example, by decreeing performance of the contracts or by awarding damages for their non-performance.

  2. By accepting the Fund Agreement members have undertaken to make the principle mentioned above effectively part of their national law. This applies to all members, whether or not they have availed themselves of the transitional arrangements of Article XIV, Section 2.

An obvious result of the foregoing undertaking is that if a party to an exchange contract of the kind referred to in Article VIII, Section 2 (b) seeks to enforce such a contract, the tribunal of the member country before which the proceedings are brought will not, on the ground that they are contrary to the public policy (ordre public) of the forum, refuse recognition of the exchange control regulations of the other member which are maintained or imposed consistently with the Fund Agreement. It also follows that such contracts will be treated as unenforceable notwithstanding that under the private international law of the forum, the law under which the foreign exchange control regulations are maintained or imposed is not the law which governs the exchange contract or its performance.

The Fund will be pleased to lend its assistance in connection with any problem which may arise in relation to the foregoing interpretation or any other aspect of Article VIII, Section 2 (b). In addition, the Fund is prepared to advise whether particular exchange control regulations are maintained or imposed consistently with the Fund Agreement.

Yours very truly,

/s/

A. N. Overby

Acting Chairman of the Executive Board

and

Acting Managing Director

APPENDIX XV ADMINISTRATIVE BUDGET

Letter of Transmittal

July 15, 1949

Dear Mr. Chairman:

The administrative budget of the Fund for the fiscal year ending April 30, 1950, as approved by the Board of Executive Directors, is presented for the information of the Board of Governors, in accordance with Section 20 of the By-Laws.

Experience in previous years has shown that it is impossible to predict that the Fund will require precisely the amounts budgeted. These amounts are an expression of present administrative plans without provision for unforeseen contingencies, inauguration of extraordinary programs or expansion of existing programs. Should such contingencies arise or present plans change materially, the amounts now budgeted may have to be changed.

Yours sincerely,

/s/

Gutt

Chairman of the Executive Board

Chairman of the Board of Governors

International Monetary Fund

ADMINISTRATIVE BUDGET FISCAL YEAR ENDING APRIL 30, 1950

As Approved by the Executive Directors of the International Monetary Fund

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Includes $35,400 for liquidation of prior-year commitments.

APPENDIX XVI (i) BALANCE SHEET, STATEMENT OF INCOME AND EXPENSE AND SUPPORTING SCHEDULES

Letter of Transmittal

July 15, 1949

My dear Mr. Chairman:

In accordance with Section 20 (b) of the By-Laws of the Fund, I have the honor to submit for the consideration of the Board of Governors a balance sheet and statement of income and expense of the Fund for the year ended April 30, 1949, together with the Auditors’ Certificate, as well as audited financial statements of the Staff Retirement Fund which was established on July 1, 1948.

In conformity with the By-Laws, the external audit of the Fund has been performed by an Audit Committee consisting of auditors nominated by three member countries. At the Fund’s request, Egypt, the United Kingdom and the United States nominated auditors to serve on this Committee. They respectively nominated Mr. Zaki Bey Hassan, Chartered Accountant, Mr. P. J. Curtis, a Deputy Director of Audit in the Exchequer and Audit Department of His Majesty’s Treasury, and Mr. Gilbert L. Cake, Associate Commissioner of Accounts of the United States Treasury. The auditors thus nominated were confirmed by the Executive Directors.

It will be noted that, in the period under review, expenditure exceeded income by $2,014,349.60, and that the total excess of expenditure over income from inception to April 30, 1949, is thus increased to $2,159,379.38.

The detailed report of the Audit Committee is being submitted separately to the Board of Governors.

Yours sincerely,

/s/

Gutt

Chairman of the Executive Board

Chairman of the Board of Governors

International Monetary Fund

APPENDIX XVI (ii) AUDITORS’ CERTIFICATE

“We have made an independent examination of the Balance Sheet of the International Monetary Fund as at April 30, 1949, of the Statement of Income and Expenditure for the fiscal year ended that date, and of the schedules related to such financial statements. Our examination was made in accordance with generally accepted auditing standards and included all procedures which we considered necessary in the circumstances. In that connection we have examined or tested, to the extent deemed appropriate, the accounting records of the Fund and other supporting evidence of its financial transactions; we have ascertained generally and to the extent practicable that financial transactions have been conducted in compliance with the Fund’s requirements; and we have obtained from the officers and staff of the Fund such information and representations as we have required in connection with the foregoing. We have also made a general review of the accounting methods and system of internal control.

“In our opinion, based on our examination, such Balance Sheet and related Statement of Income and Expenditure, together with the notes appearing thereon, present fairly the financial position of the International Monetary Fund as at April 30, 1949, and the results of its operations for the year ended that date, in conformity with generally accepted accounting principles applied on a basis consistent with that of the previous fiscal period from July 1, 1947 to April 30, 1948.”

/s/ Z. Hassan (Egypt)

/s/ P. J. Curtis

(United Kingdom)

/s/ Gilbert L. Cake

(United States)

APPENDIX XVI (iii) BALANCE SHEET

April 30, 1949

Values expressed in United States dollars on the basis of established parities

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NOTES TO BALANCE SHEET

1 The established parities for members’ currencies represent par values in relation to the United States dollar as agreed to by the Fund and the members concerned, with exception of the French franc which has, from October 18, 1948, been computed, for bookkeeping purposes, at a provisional rate of 261.701 French francs per U.S. dollar. From January 26 to October 18, 1948, the provisional rate in effect was 214.392 francs per dollar as compared with the original par value of 119.107 francs per dollar. Appropriate adjustments of the Fund’s holdings of this currency were made to sustain the value thereof at the successive provisional rates.

2 Gold with the United States depository of the Fund includes 7,432 bars, .995 fine or higher, which are not U.S. Assay Office unmutilated bars. A reserve is provided to meet the potential cost of turning certain of these bars into U.S. Assay Office bars. The amount of gold shown in this balance sheet does not include 1,297.309 fine ounces with the United States depository which are earmarked by the Fund for certain members in respect of excess payments of charges.

3 A determination is required at the end of each financial year of the Fund regarding the obligation, if any, which exists on the part of each member to repurchase from the Fund a portion of its currency under Article V, Section 7, of the Fund Agreement. A repurchase obligation of Costa Rica amounting to the equivalent of $874,000 was determined in respect of the first financial year of the Fund, ended April 30, 1948, and has been effected. In respect of the same financial year, determinations will be necessary for eight other members when the required information regarding those members’ monetary reserves is obtained.

4 The By-Laws of the Fund provide that Governors, Directors, Alternates, and staff shall, in addition to basic salaries and allowances, be compensated for national income taxation thereon. Provision has been made, at April 30, 1949, for all known claims. While a certain liability is considered to exist for unascertained claims it is not practicable to estimate the amount for balance sheet purposes. In addition, the Fund has a substantial contingent liability with respect to prospective claimants whose claims will not arise until they are required to make their tax payments under existing laws.

APPENDIX XVI (iv) STATEMENT OF INCOME AND EXPENDITURE

Year ended April 30, 1949

Values expressed in United States dollars on basis of established parities

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NOTES TO STATEMENT OF INCOME AND EXPENDITURE

1 The established parities for members’ currencies represent par values in relation to the U.S. dollar as agreed to by the Fund with the members concerned, with exception of the French franc which for bookkeeping purposes is computed at a provisional rate of 261.701 francs to the dollar. See also note 1 to Balance Sheet.

2 Income from operations represents charges levied against members. Such charges are payable in gold except under certain conditions specified in Article V, Section 8(f) of the Fund Agreement.

3 Expenditure under the heading of “Travel” does not include that in connection with meetings of the Board of Governors included in the expense of such meetings.

4 It continues to be the policy of the Fund to write off the cost value of all furniture, office equipment, and automobiles by establishing full depreciation reserves against the assets and to charge the cost value of consumable supplies to expense of the fiscal year in which purchased.

5 Expense of external audit relates exclusively to the audit for the fiscal period ended April 30, 1948.

6 The net credit for exchange adjustments is the result of bookkeeping entries due to the expression in U.S. dollar values of transactions in gold and members’ currencies, which involves the use of fractional computations. The net credit does not represent a true gain such as may arise in dealing in foreign exchange at fluctuating rates.

APPENDIX XVI (v) GOLD WITH DEPOSITORIES

April 30, 1949

Valued at U.S. $35 per fine ounce

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NOTE:

See note 2 of the Balance Sheet regarding gold with the Federal Reserve Bank of New York. The gold shown above with that depository does not include 1,297.309 fine ounces which are earmarked by the Fund for the following members in respect of excess payments of charges:

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APPENDIX XVI (vi) CURRENCIES AND SECURITIES WITH DEPOSITORIES-April 30, 1949

Equivalent values in United States dollars are based on exchange rates for established par values

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NOTES:

Par values for members’ currencies are established in relation to the U.S. dollar as agreed to by the Fund and the members concerned with the exception of the French franc, which for bookkeeping purposes is computed at a provisional rate of 261.701 francs to the dollar. (See also See also note 1 to Balance Sheet.

Exchange rates represent number of units of national currencies to the U.S. dollar except for items carrying asterisk (*), which represent number of U.S. cents to the related unit of national currency.

A checking account is maintained with Riggs National Bank in Washington, D.C. for the purpose of making local payments for administrative expenditure.

SUMMARY

Currency and Securities with Depositories, per Balance Sheet, at Equivalent Value in U.S. Dollars

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APPENDIX XVI (vii) STATUS OF SUBSCRIPTIONS TO CAPITAL—April 30, 1949

Values expressed in United States dollars on basis of established parities (See Note1)

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NOTES:

The established parities for members’ currencies represent par values in relation to the United States dollar as agreed to by the Fund and the members concerned for the payment of their subscriptions. See also Balance Sheet regarding note on subsequent provisional rates established for the French franc for bookkeeping purposes.

As per Article XX, Section 2(d), of the Articles of Agreement.

New Member.

Quota as reduced.

Quota as increased.

Fund has provisionally accepted member’s payment in gold which is less than 25% of the member’s quota.

Member’s payment exclusively in currencies is considered by Fund as final.

APPENDIX XVI (viii) OTHER ASSETS

April 30, 1949

Values expressed in United States dollars (See Note1)

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NOTES:

The rates used for the expression of other currencies in U.S. dollars are explained in Note 1 to the Balance Sheet.

Cash with technical representatives overseas consists of U.S. dollars 400, French francs 7,499, and Egyptian pounds 334.890.

APPENDIX XVI (ix) LIABILITIES

April 30, 1949

Values expressed in United States dollars (See Note)

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NOTE:The rates used for the expression of other currencies in U.S. dollars are explained in Note1 to the Balance Sheet.

APPENDIX XVI (x) SUMMARY OF TRANSACTIONS

For the Year ended April 30, 1949

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NOTE:Par values used for exchange transactions involving Belgian Francs and Netherland Guilders are in terms of gold in relation to these currencies instead of in terms of U.S. Dollars. This required certain bookkeeping exchange adjustments whereby the accounts of the Fund reflect the Belgian Francs sold as amounting to $11,408,362.34 and the Netherland Guilders purchased as amounting to $6,845,032.24.

APPENDIX XVI (xi) STAFF RETIREMENT FUND AUDITORS’ CERTIFICATE

“We have made an independent audit of the accounts of the Staff Retirement Fund of the International Monetary Fund from July 1, 1948, the date of its establishment, to April 30, 1949. Our examination was made in accordance with generally accepted auditing standards and included all procedures which we considered necessary in the circumstances. In that connection, consideration was given to the authority and other requirements governing transactions of the Staff Retirement Fund.

“The audit did not include a verification of the individual participants’ accounts as at April 30, 1949, except for inquiry into certain of such accounts as a consequence of the application of auditing procedures to the other accounts of the Staff Retirement Fund. We ascertained, however, that the Internal Auditor of the International Monetary Fund had made a detailed audit of all participants’ individual accounts as at April 30, 1919, and we satisfied ourselves that application of the auditing procedures adopted by him would be adequate to insure the correctness of such individual accounts with regard for eligibility, contributions, and interest allowed.

“With regard to the note appearing on the financial statements concerning the income reported on certain investments, we believe that more satisfactory results would be obtained by employing the accounting method which would provide for deferring a portion of the interest received on United States Savings Bonds, Series G, on the basis of the redemption values of such bonds under conditions existing April 30, 1949. We recognize, however, that the accounting method used by the International Monetary Fund in relation to these securities is sometimes followed in practice.

“In our opinion, based on our examination and subject to the foregoing comment, the Balance Sheet and related statements of the Accumulation Account, Participants’ Account, and Application of Funds, together with the notes appearing thereon, present fairly the financial position of the Staff Retirement Fund of the International Monetary Fund as at April 30, 1949 and the results of operations from July 1, 1948 to April 30, 1949, in conformity with generally accepted accounting principles.”

/s/ Z. Hassan

(Egypt)

/s/ P. J. Curtis

(United Kingdom)

/s/ Gilbert L. Cake

(United States)

APPENDIX XVI (xii) STAFF RETIREMENT FUND BALANCE SHEET

April 30, 1949

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See Notes on page 109, which are an integral part of this Statement.

APPENDIX XVI (xiii) STAFF RETIREMENT FUND STATEMENT OF ACCUMULATION ACCOUNT

July 1, 1948

(inception) to April 30, 1949

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See Notes on page 109, which are an integral part of this Statement.

APPENDIX XVI (xiv) STAFF RETIREMENT FUND STATEMENT OF PARTICIPANTS’ ACCOUNT

July 1, 1948

(inception) to April 30, 1949

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See Notes on page 109, which are an integral part of this Statement.

APPENDIX XVI (xv) STAFF RETIREMENT FUND STATEMENT OF APPLICATION OF FUNDS

July 1, 1948 (inception) to April 30, 1949

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See Notes on page 109, which are an integral part of this Statement.

APPENDIX XVI (xvi)

NOTES TO FINANCIAL STATEMENTS OF STAFF RETIREMENT FUND

1 Income on investments includes interest on United States Savings Bonds, Series G, currently paid at the rate of 21/2

2 Interest credited to Participants’ Accounts was at the regular rate provided for in the approved Staff Retirement Plan. While such interest amounting to $3,647.05 was charged to Accumulation Account, this account was credited with $256.65 for interest received from certain participants in respect of unpaid prior service contributions.

APPENDIX XVII (i) SCHEDULE OF PAR VALUES–as of July 1, 1949

CURRENCIES OF METROPOLITAN AREAS

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Since January 26, 1948, there has been no agreed par value with the Fund for the French franc, nor for separate currencies in French non-metropolitan areas except for those listed in the second part of the present Schedule.