Mr. Blowers, Governor of the Saudi Arabian Monetary Agency, was until recently special advisor in the Exchange Restrictions Department. He is a graduate of Harvard University. Prior to joining the staff of the Fund, he had been General Manager, Bank of Monrovia, Liberia; Governor, State Bank of Ethiopia, where he was responsible for establishing the State Bank and organizing the issue of the Ethiopian dollar; and Deputy Director, Trade and Payments Division, ECA, Paris.
Mr. McLeod, an economist in the Latin American Division (North), is now on leave from the Fund to be associated with Mr. Blowers at the Saudi Arabian Monetary Agency. He is a graduate of the Queens University, Kingston, Canada and of Harvard University. He was formerly with the Canadian Department of Finance in Ottawa. He has participated in several missions to Latin American countries as a financial advisor, and has contributed to various economic journals.
The Report of the Four Power Commission of Investigation for the Former Italian Colonies, Volume III, Part Two, page 40, cites an unnamed Italian source to the effect that the average yearly monetary circulation in Tripolitania for the period 1936 to 1949 amounted to 5,709,000,000 lire. According to the International Monetary Fund, International Financial Statistics, however, the total Italian currency circulation was 17.5 billion lire at the end of 1937, and 24.7 billion at the end of 1939. It is hardly possible that the note and coin circulation of Tripolitania could have been one quarter to one third of the total Italian issue; the circulation in Tripolitania in 1950 was equivalent to about one half of one per cent of that in Italy.
It does not necessarily follow that this represents the amount of lire previously circulating in the territory, either in this case or in the case of Tripolitania. The arbitrary valuation of the lira made it profitable to bring in sums from abroad. On the other hand, especially in Tripolitania, it may well be that substantial amounts of lire were not turned in at the time of the currency conversion. The final victory of the Allies was not yet certain, and Italian residents may have retained some lire.
In Geneva, on May 30,1951, the Minister of Finance in the Provisional Libyan Government stated that Libya would become a member of the sterling area and would maintain all her reserves in sterling. Presumably, however, a formal decision will have to await the transfer of powers to the Provisional Government.
Changes in saving habits, “liquidity preference,” or other factors not directly related to changes in real income may, of course, offset this tendency by inducing people to hold more of their assets in less liquid forms than idle monetary balances. Domestic inflation or deflation would alter the number of monetary that would constitute a given volume of real purchasing power, and might affect the real value of the money supply by producing a net change in real income or by affecting people’s desires to hold money as an asset.
In any currency system, reserves equal to a certain portion of the currency issue must be kept entirely in spot exchange or short-dated securities, to meet normal and contingent fluctuations in the circulation. With reserves of 100 per cent, however, the remainder may be invested in long-term securities, which yield relatively high interest rates. If the country borrows at short term and at lower interest rates instead of sacrificing its reserves, there may actually be a net interest return rather than a net cost.
It should not be held as a local currency deposit in a bank in Libya; if it is not in physical stocks of goods, it must be available for external purchases in time of need.
Not all the recommendations were unanimous. Subsequently, the Egyptian representatives dissociated themselves from the recommendations of the other representatives.
For the corresponding recommendations of the Fund staff members, see pages 455-56.
Law No. 4, published in the Official Gazette, Vol. 1, No. 1, October 24, 1951, as amended by a Royal Decree dated April 3, 1952; both documents are reprinted in an English translation in Appendix IV to the report of the UN Mission of Technical Assistance to Libya.
For further details of developments since the submission of the Report, see United Nations, Second Annual Report of the United Nations Commissioner in Libya and Supplementary Report (General Assembly Official Records, Sixth Session, Supplement No. 17(A/1949) and 17A(A/1949 Add. 1), Paris, 1951 and 1952).