This paper discusses the 1966 Annual Meetings of the IMF and of the World Bank and its affiliates, the International Development Association (IDA) and the International Finance Corporation. The annual meetings were held in September in Washington. The widespread shortage of capital and rising interest rates were described as posing problems for the Bank’s own borrowings as well as for developing countries. Mr. George D. Woods, the President, stressed the allied problem of the urgent need for a substantial replenishment of the resources available to IDA.


This paper discusses the 1966 Annual Meetings of the IMF and of the World Bank and its affiliates, the International Development Association (IDA) and the International Finance Corporation. The annual meetings were held in September in Washington. The widespread shortage of capital and rising interest rates were described as posing problems for the Bank’s own borrowings as well as for developing countries. Mr. George D. Woods, the President, stressed the allied problem of the urgent need for a substantial replenishment of the resources available to IDA.

Martin Shivnan

Recognition of the many and, in some cases, striking accomplishments of developing countries in recent years was accompanied by a warning at the Bank’s Annual Meeting of the danger of a serious loss of momentum unless strenuous efforts and new thinking were brought to bear on bridging what was described as the “crucial finance gap” now facing the world’s development efforts. Mr. George D. Woods, the President of the Bank Group, described this gap in terms of the difference between the capital available and the capacity of the developing countries to use increasing amounts of capital effectively and productively.

The widespread shortage of capital was stressed by Governors from every sector of the Bank’s membership. Because of it, Mr. Woods said, the Bank and IDA themselves faced a serious financial problem. The Bank had been forced to offer its recent bond issues in the U.S. and Canadian markets at higher interest rates than ever before and faced the prospect of still higher rates on its expected borrowings in Europe during the current fiscal year.

Despite the transfer, voted by the Board of Governors during the Meeting, of $75 million from Bank earnings to IDA, the latter’s ability to undertake new commitments would be exhausted before the end of the current fiscal year.

“We can no longer postpone decisions looking toward the replenishment of IDA resources,” said Mr. Woods. He was able to report, however, that discussions with IDA Part I countries were continuing “in a spirit of mutual desire to arrive at” a solution that would equate the broad viewpoints of the industrialized and developing countries. This announcement was followed by statements from a number of Governors from IDA Part I countries, confirming their Governments’ support for a substantial replenishment subject, in several important cases, to the establishment of arrangements designed to avoid adverse effects upon balances of payments.

Developmental Achievements

In a review of developmental achievements, where the record was “clearly not one of failure,” Mr. Woods pointed out that the developing countries had forged ahead in the vital areas of electric power, mining, and industry, had made rapid advances in transportation, and were expanding their educational systems significantly faster than the growth of population. Since World War II, the people of the developing world had acquired skills, adopted attitudes, and established institutions that had greatly increased their ability to achieve further development. Many were attaching greater importance to fiscal and monetary measures and to market incentives and were building more adequate frameworks of administration. In the three years from 1962 through 1964 they had financed, on average, between 75 and 80 percent of their investment from their own savings.

A quarter of the 80 or so developing countries in the Bank’s membership had achieved an annual growth rate of 5 percent or more since the 1950’s—enough to double per capita income in a generation—and some 15 countries had attained the basic conditions necessary to achieve self-sustaining growth within the next 10 to 15 years.

Nevertheless, the majority of the people in the Bank’s developing countries still had yearly incomes below $100 per capita, and the developing countries generally continued to face severe handicaps, such as excessive dependence on volatile primary products markets, heavy debt servicing burdens, and, in many countries, rates of population growth that outweighed the gains in production. Although more could still be done in some countries to increase public savings, external assistance would continue to be essential to their development.

At this juncture, and taking into account the rising incomes of the industrialized countries, it was ironic that development assistance was, in fact, slowing down. In the past year, assistance from public sources, as a proportion of the income of the industrialized countries, had declined for the fifth year in succession. Many Governors, including Mr. Henry H. Fowler, the Governor for the United States, Mr. A. A. Atta, the Governor for Nigeria, and Mr. David Horowitz, the Governor for Israel, returned to the theme that this performance had failed to meet the hopes of the developing countries and that the challenge for the future was more urgent than ever before.

Mr. Woods acknowledged the serious problems, which he said should not be minimized, of inflationary pressures, heavy internal demands for capital, and imbalances of international payments, which hampered justifiable increases in development funds by the capital exporting countries. It was hoped that these would prove to be short-term constraints, and he stressed that there was evidence in history to show that impediments to development finance could be overcome with the help of “realistic priorities.” While he noted, among other things, some evidence of moods of skepticism or pessimism in some sectors of the capital-exporting countries, largely owing to confusion in some people’s minds about the objectives of development finance, he emphasized again the implication for international affairs of a serious loss of heart among the leaders of Africa, Asia, and Latin America.

IDA Replenishment

The Chairman of the Boards and Governor for Iran, Mr. Jamshid Amouzegar, reminded the meetings that the question of IDA replenishment was a matter of urgent concern. He also stressed the need for appropriate priorities on the part of developed and developing countries and for a coordinated attack on problems of payments imbalances as well as on obstacles to trade, aid, and growth.

Mr. George W. Ball, a temporary Alternate Governor for the United States, said the United States was prepared to increase substantially its contribution to IDA, provided other Part I members agreed to carry an appropriate share of the burden of replenishment. He stated, however, that it was essential to devise satisfactory arrangements to permit donors in balance of payments deficit to make their proper contributions without further unbalancing their external accounts. He added that the United States looked to the Bank to take the lead in shaping proposals to deal with the transfer problem.

Mr. James Callaghan, the Fund Governor for the United Kingdom, reported that Britain’s aid program provided for a substantial IDA replenishment. The recent Commonwealth Finance Ministers Conference in Montreal had unanimously welcomed Mr. Woods’ initiative.

Mr. Krister Wickman, a temporary Alternate Governor for Sweden, pledging Sweden’s full support, proposed two alternative formulas designed, in part, to help countries with balance of payments difficulties. First, countries with serious balance of payments difficulties might be permitted to defer payment of part of their enlarged commitment to IDA—a procedure the potentially detrimental effects of which would be limited by the fact that it seemed unlikely to be simultaneously invoked by many contributors. In a second proposal, Mr. Wickman suggested that payments of IDA replenishment funds begin in the fiscal year 1968–69 instead of waiting until 1969-70, as suggested in one proposal. This would extend the replenishment period over four years, instead of three.

Mr. Horowitz, the Governor for Israel, recommended that the Bank allocate to IDA a higher proportion of its profit in the current fiscal year, arguing that the Bank’s reserves already provided adequate cover for its outstanding debt, particularly in view of the Bank’s substantial uncalled capital. (In a similar vein, Mr. Lim Kim San, the Governor for Singapore, suggested that some of the reserves might be earmarked for loans on concessionary terms to developing countries which failed to qualify for IDA assistance.) Mr. Horowitz also suggested that the Bank amend its charter in favor of lending to IDA, following the precedent of the amendment to the Articles of Agreement to permit lending to IFC.

Mr. A. Vondeling, the Governor for the Netherlands, and Mr. Ivar N0rgaard, the Governor for Denmark, announced that their Governments would support proposals for an increase in IDA resources. The proposal to increase IDA resources to $1 billion annually was widely welcomed by the less developed countries. Mr. César Romeo Acosta, the Governor for Paraguay, speaking for the Latin American countries and the Philippines, voiced the hope that the replenishment would permit an increase in IDA’s commitments in Latin American countries which, it was stated, were bearing a relatively heavier debt servicing burden than other countries. A similar request, for more generous IDA financing in Africa, was made by Mr. Mohamed Salem Ould M’Khai-tirat, the Fund Governor for Mauritania, speaking on behalf of the seven countries of the West African Currency Union.

Interest Rates

The Governors noted Mr. Woods’ statement that he expected to re-examine with the Bank’s Executive Directors in the not too distant future the question of interest rates on Bank loans. Among others, Mr. Vondeling commented that “unavoidably the Bank’s lending terms have to reflect market trends.”.

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The Governors also concentrated on the Bank’s response to a variety of challenges in different sectors of the developing economies.


The failure of food production in many countries to keep pace with the growth in population was cited by several speakers. Mr. Tan Siew Sin, the Governor for Malaysia, urged the need for more emphasis on aid to agriculture. The Bank’s continued support for agriculture was noted by Mr. Sachindra Chaudhuri, the Governor for India, who pointed out that the phenomenal increase in population in developing countries was, itself, the concomitant of economic development and the control of disease. The need for an internationally concerted campaign, particularly in such matters as the supply of agricultural machinery, fertilizers, insecticides, and technical know-how, was emphasized by Mr. N. M. Uquaili, the Governor for Pakistan.

Mr. Woods stressed that, despite many difficulties, there was reason to look for a more productive future for agriculture. A number of developing countries, including Israel, Korea, Mexico, and Thailand, had demonstrated what could be done in a relatively short period. The increased application of fertilizers was “probably the most promising single way” to achieve this end. The developing countries themselves were relatively rich in the raw materials necessary for the production of chemical fertilizers. It was essential, therefore, to remove the barriers now existing in some countries to the flow of the necessary capital and know-how. Mr. Ching-Yu Chen, the Governor for China, stated that his Government had provided specialist teams in agriculture to work in Southeast Asian and in African countries and would be prepared to coordinate its program with the Bank’s efforts in the same direction.

Commodity Problems

Volatile and declining primary product prices were cited by many Governors as a principal cause of the deterioration in the developing countries’ terms of trade. The Bank’s own study of supplementary financial measures to deal with problems arising from unexpected adverse movements in the export proceeds of less developed countries was described as an “outstanding work whose value had been vindicated” by the positive response already evoked. Mr. Wickman of Sweden (whose country, together with the United Kingdom, had originally proposed such measures and recommended to UNCTAD the need for such a study) said it was worthy of the most careful consideration by all governments.

Mr. Michel Debré, the Governor for France, reported that France was prepared to open negotiations on the stabilization of primary products prices “on the widest basis. & Our country is hoping for such negotiations and has already made preparations for them by studies which could provide the basis for a discussion too long delayed,” he said.

Supporting the need for commodity agreements, Mr. William McMahon, the Governor for Australia, said that his country had already taken the initiative in extending preferences to less developed countries and urged other industrialized countries to give primary producers greater access to their markets.

The Governor for Paraguay, on behalf of the Latin American nations and the Philippines, welcomed France’s statement, while Mr. L. Kalule-Settala, the Governor for Uganda, Mr. J. J. Litho, the Governor for the Democratic Republic of the Congo, and Mr. Mohamed Salem Ould M’Khaitirat, the Fund Governor for Mauritania, were among others supporting the plea for commodity stabilization measures.


Mr. Woods reported that, following the amendment to the Articles of Agreement of the Bank and IFC, it was planned to open, in the immediate future, a $100 million line of credit from the Bank to IFC. The latter had ended its first decade of operations with the most active year in its history, and a brisk pace of activities had been maintained in the current fiscal year, with all indications pointing to a continuing increase in the size and range of its investments. Mr. Karl Blessing, the Fund Governor for Germany, stressed that private enterprise and initiative were among the most essential and dynamic elements of economic development. Mr. Uquaili, the Governor for Pakistan, suggested that IFC should undertake a survey of the measures open to developing countries to promote private enterprise in their areas, and Mr. Habib Thiam, the Governor for Senegal, underlined the fact that IFC’s lead was often decisive in introducing new industries into developing countries. Others, however, including Mr. D. B. Sangster, the Governor for Jamaica, Mr. R. G. O. King, the Governor for Sierra Leone, and Mr. Paul Bomani, the Governor for Tanzania, argued that IFC’s exclusion, under its Articles of Agreement, from investment in government-owned development banks, seriously limited the role it could play in some developing countries.

Settlement of Investment Disputes

The Governors welcomed the fact that the Convention on the Settlement of Investment Disputes, having been ratified by the necessary 20 countries, would enter into force on October 14, 1966, with the establishment of an International Center for the conciliation or arbitration of investment disputes between States and foreign nationals; it was hoped that this would prove a valuable additional instrument for promoting the flow of private capital into the developing world. Among those expressing support were Mr. Abdullah Yaftaly, the Governor for Afghanistan, who signed the Convention during the Annual Meeting, Mr. A. Vondeling, the Governor for the Netherlands, and the Chairman, Mr. Jamshid Amouzegar, the Governor for Iran.

A second major step, the preparation of a study and draft charter for a multilateral insurance scheme for private international investments to guard against noncommercial business risks, undertaken by the Bank at the request of OECD and UNCTAD, was also warmly welcomed.

Consultative Groups

The organization of Consortia and Consultative Groups to coordinate the lending policies of the capital-exporting countries toward individual developing countries was widely endorsed. Mr. Sachindra Chaudhuri, the Governor for India, the country with the longest experience with this type of coordinating machinery, underlined its value as a clearinghouse, but pointed out that much remained to be done, notably through efforts to persuade donor countries to make commitments beyond a period of one year. Mr. Atta, Governor for Nigeria, also made a plea for more program aid through Consultative Groups. The organization of these groups was welcomed by Mr. Serm Vinicchaya-kul, the Governor for Thailand, and Mr. Se Ryun Kim, the Alternate Governor for Korea. Others applauding the Bank’s initiative and advocating a further extension of the work included Mr. Takeo Fukuda, the Governor for Japan, Mr. Hatim S. Zu’bi, the Governor for Jordan, and Mr. Kirti Nidhi Bista, the Governor for Nepal, together with the Governors for Germany, Canada, and Mauritania.

Other Initiatives

Bank investments in education—described as one of the keys to maintaining economic and political stability in the developing countries—the growing need for technical assistance, and the desirability of continuing close links between the Bank and new regional bodies, such as the Asian and African Development Banks, also received attention in the Governors’ discussions.