SUMMARY PROCEEDINGS 1962

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©International Monetary Fund. Not for Redistribution INTERNATIONAL MONETARY FUND

SUMMARY PROCEEDINGS

OF THE SEVENTEENTH ANNUAL MEETING

OF THE BOARD OF GOVERNORS

SEPTEMBER 1962

WASHINGTON, D. C.

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©International Monetary Fund. Not for Redistribution CONTENTS

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Introductory Note ix

Address by the President of the United States of America, John F. Kennedy 1

Opening Address by the Chairman of the Boards of Gov- ernors, the Governor for Saudi Arabia, Ahmed Zaki Saad. 6

Presentation of the Seventeenth Annual Report by the Chair- man of the Executive Board and Managing Director of the International Monetary Fund, Per Jacobsson 16

Discussion of the Seventeenth Annual Report: Statements by the Governors for Turkey—Ekrem Alican 34 Sierra Leone—A. M. Margai 37 United States—Douglas Dillon 38 Canada—Donald M. Fleming 46 Kuwait—Sheikh Jabir Al-Ahmad Al-Jabir 53 France—Jacques Brunet 54 United Kingdom—Reginald Maudling 61 Federal Republic of Germany—Karl Blessing 68 Sudan—Abdel Magid Ahmed 73 Japan—Kakuei Tanaka 76 Australia—Harold Holt 78 India—Morarji R. Desai 81 Pakistan—Mumtaz Mirza 85 Philippines—Andres V. Castillo 89 Ceylon—D. W. Rajapatirana 95 South Africa—T. E. Donges 98 Austria—Reinhard Kamitz 102 Italy—Roberto Tremelloni 104 Greece—Xenophon Zolotas 108

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PAGE Netherlands—M. W. Holtrop 116 Argentina—Alvaro C. Alsogaray 119 Tunisia—Hedi Nouira 125 Israel—Levi Eshkol 129 Peru—Enrique Bellido 132 Spain—Alberto Ullastres 134 Tanganyika—Paul Bomani 135 Paraguay—General Cesar Barrientos 139 United Arab Republic—Abdel Hakim El Rifai 143 Portugal—Rafael Duque 147 Yugoslavia—Nikola Miljanic 149 Iraq—Bakir Al-Dujaili 152 Concluding Remarks by the Chairman of the Executive Board and Managing Director of the International Mone- tary Fund, Per Jacobsson 155 Statements Bearing on Fund Policy Delivered at the Annual Discussion of the IBRD, IFC, and IDA by the Governors of the Fund and Bank for Togo—Hospice D. Coco 162 Ghana—F. K. D. Goka 164 Malaya—Tan Siew Sin 168 Delivered at the Second Joint Session by the Governor of the Bank for the United Arab Republic— A. M. El Kaissouni 173 Governor of the Fund for Senegal—Andre Peytavin. . . 177 Governor of the Fund for Nepal—Lakshmi Nath Gautam 181 Delivered at the Closing Joint Session by the Governor of the Bank for Colombia—Carlos Sanz de Santamaria 182 Reports of the Procedures Committees Report I 189 Annex I Schedule of Meetings 191

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PAGE Annex II Provisions Relating to the Conduct of the Meetings 193 Annex III Agenda 194 Annex IV 1962 Regular Election of Executive Directors 195 Statement of Results of 1962 Regular Election of Executive Directors 205 Report III1 209 Annex I 211 Annex II 212 Annex III 214 Report IV 215 Annex I 217

Resolutions 17-1 Membership for the Republic of Somalia 218 17-2 Increase in the Quota of the United Arab Republic. 221 17-3 Membership for the State of Kuwait 222 17-4 Membership for Tanganyika 225 17-5 Election of an Additional Executive Director 228 17-6 1962 Regular Election of Executive Directors 229 17-7 Financial Statements, Report on Audit, and Administrative Budget 229 17-8 General Reserve 229 17-9 Amendments to Rules and Regulations 230 17-10 Membership for the Federal Republic of Cameroon. 230 17-11 Membership for the Central African Republic. ... 233 17-12 Membership for the Republic of Chad 236 17-13 Membership for the Republic of the Congo (Brazzaville) 239 17-14 Membership for the Republic of Gabon 242 17-15 Membership for the Republic of Guinea 245 17-16 Membership for the Republic of the Ivory Coast. . 248

1 Report II dealt with the business of the Boards of Governors of the IBRD, IFC, and IDA.

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PAGE 17-17 Membership for Jamaica 250 17-18 Membership for the Republic of Niger 253 17-19 Membership for Upper Volta 255 17-20 Membership for the Republic of Dahomey 258

Attendance Members of Delegations 261 Observers 272

Executive Directors and Alternates 275

Reference List of Principal Topics 277

©International Monetary Fund. Not for Redistribution INTRODUCTORY NOTE

The Seventeenth Annual Meeting of the Board of Governors of the International Monetary Fund was held in Washington, from September 17 through September 21, 1962, under the Chairman- ship of the Honorable Ahmed Zaki Saad, Governor for Saudi Arabia. The meeting was held in conjunction with the annual meetings of the Boards of Governors of the International Bank for Reconstruction and Development and its affiliates. These Summary Proceedings of the Fund include the resolutions adopted by the Board of Governors, reports and recommendations of the Procedures Committees, and selected addresses.

ROMAN L. HORNE Secretary International Monetary Fund

Washington, D. C. October 30, 1962

IX

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©International Monetary Fund. Not for Redistribution ADDRESS BY THE PRESIDENT OF THE UNITED STATES OF AMERICA l

John F. Kennedy

This is my first opportunity to take part in your Annual Meetings and to welcome you here to Washington—and I do so with genuine pleasure. For you are concerned with the problems which have been among my primary concerns since the day I took office exactly 20 months ago; and in that time I have learned how vital a role is played by the International Monetary Fund and the International Bank for Reconstruction and Development and its affiliated institutions. The work of the International Development Association is particularly important, and this country fully sup- ports the proposal that the Executive Directors develop a program to increase its resources. The pioneering practices of the Bank—which have set a standard for others to follow—will sorely miss the services of Eugene Black. I hope he will permit us to call upon his wise counsel in the future, and that the rest of us, in pursuing the goals which he set, will increase our own efforts—including efforts in the indus- trialized countries to provide greater capital assistance to the less developed areas; efforts also in the industrialized countries to maintain at home prosperous and easily accessible markets for the products of the growing nations; efforts to reach commodity agreements and other arrangements which will help stabilize the export earnings of those nations; and, finally and most importantly, greater efforts in the developing nations themselves to mobilize effectively their own people and financial resources, and to make certain that the benefits of increased output are shared by the many and not by the few. 1 Delivered at the Second Joint Session, September 20, 1962. 1

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In addition to these discussions on the role of the Bank, your meetings this year, as they did last year, are giving top attention to the state of the dollar—and that has been at or near the top of my own agenda throughout the last year and a half. We in the United States feel no need to be self-conscious about discussing the dollar. It is not only our national currency; it is an international currency. It plays a key role in the day-to-day func- tioning of the free world's financial framework. It is the most effective substitute for gold in the international payments system. It the dollar did not exist as an important reserve currency, it would have to be "invented"—for a volume of foreign trade already reaching $130 billion a year and growing rapidly, accom- panied by large international capital movements, cannot rest solely on a slowly growing stock of gold which now totals only $40 billion. The security of the dollar, therefore, is and ought to be of major concern to every nation here. To undermine the strength of the dollar would undermine the strength of the free world. To compete for national financial security in its narrowest sense by taking individual actions inconsistent with our common goals would in the end only impair the security of us all. I recognize that this nation has special responsibilities—as one of the leaders of the free world, as its richest and most powerful nation, as possessor of its most important currency, and as the chief banker for international trade. We did not seek all of these burdens, but we do not shrink from them. We are taking every prudent step to maintain the strength of the dollar, to improve our balance of payments, and to back up the dollar by expanding the growth of our economy. We are pledged to keep the dollar fully convertible into gold, and to back that pledge with all our resources of gold and credit. We have not impaired the value of the dollar by imposing restric- tions on its use. We have not imposed upon our citizens in peacetime any limitations on the amount of dollars they may wish to take or send abroad. We have followed a liberal policy on trade. And we have continued to supply our friends and allies with dollars and gold to rebuild their economies and defend their freedom.

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All this we have willingly done. No other country or currency has borne so many burdens. But we cannot and should not bear them all alone. I know that other countries do not expect us to bear indefinitely both the responsibilities of maintaining an international currency and, in addition, a disproportionate share of the costs of defending the free world and fostering social and economic progress in the less developed parts of the world. Concern over our imbalance of payments is not our concern alone—for it is not caused by our own narrow self-interest. Our deficit this year is expected to approximate $li billion, a considerable improvement over last year's $2i billion and even higher deficits in the years before. But our total gross military expenditures abroad are $3 billion alone. Our dollar aid expenditures abroad are $1.3 billion. The dollar itself is strong, and our commercial trade, excluding exports financed by AID, produces a surplus of nearly $3 billion. In short, our balance of payments deficit is not the result of any monetary or economic mismanagement, but the result of expenditures our people have made on behalf of the people of the free world. In 1946 the United States held over 60 per cent of the world's supply of gold. Now we are down to 40 per cent. And during that time we have spent some $88 billion overseas for the defense and aid of others. The European nations alone received some $26 billion in economic aid. The United States as a result no longer has a disproportionate share of the free world's gold, economic strength— or economic responsibility. That is why I emphasize once again: these are not American problems, they are free world problems. They are problems which cannot be met by one nation in isolation or by many nations in disarray. They are not the sole concern of either the rich or the poor, of either deficit or surplus nations alone. When burdens are shared, there is no undue burden on any nation. When risk is shared, there is less risk for all. And cooperative efforts to defend the international currency system based primarily on the dollar, and to share other responsibilities, are not, therefore, based on appeals to gratitude or even friendship, but on the hard and factual grounds of self-interest and common sense.

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Of course, the United States could bring its international pay- ments into balance overnight if that were the only goal we sought. We could withdraw our forces, reduce our aid, tie it wholly to purchases in this country, raise high tariff barriers, and restrict the foreign investment or other uses of American dollars. Such a policy, it is true, would give rise to a new era of dollar shortages, free world insecurity, and American isolation; but we would have "solved" the balance of payments. But the basic strength of the dollar makes such actions as unnecessary as they are unwise. They would not only be incon- sistent with the role of the United States in the world today; they would, because of the crucial role of the dollar, be utterly self- defeating. All of us here are determined to follow the only other feasible course—not the unacceptable courses of restriction and isolation, or deflation, but the course of true cooperation, of liberal payments and trade, of sharing the cost of our NATO and Pacific defenses, of sharing the cost of the free world's development aid, and of working together on steps to greater international stability, with other currencies in addition to the dollar bearing an increasing share of its central responsibilities. We in the United States recognize that our own obligation in this regard includes, as a matter of the first priority, taking action to eliminate the deficit in our balance of payments, and to do so without resorting to deflation or retreating to isolation. I have spoken frankly at this meeting because these two successful institutions, the Bank and the Fund, have long flourished in a spirit of candor, and have consistently shown a reliable capacity to respond both flexibly and effectively to new needs and new challenges. This spirit of cooperation and candor and initiative will, I know, continue in the future. For only in this spirit can we hope to maintain a sturdy free world financial system, with stable exchange rates, capable of supporting a growing flow of trade and foreign investment free from discrimination and restrictions. I have spoken frankly, moreover, because I believe the current strength of the dollar enables us to speak frankly and with confidence. Some sharing of responsibilities has already been

©International Monetary Fund. Not for Redistribution ADDRESS BY PRESIDENT OF UNITED STATES 5 achieved. Considerable progress in the balance of our international accounts has been made. A new agreement among ten indus- trialized countries to supplement the resources of the Fund, with special borrowing arrangements of up to $6 billion, has been concluded, and implementing action will be completed by the United States Congress within the next few days or weeks. Less formal arrangements between the major trading countries have also been evolved to cope with any potential strains or shocks that might arise from a sudden movement of capital. These arrange- ments, I should add, contain within themselves the possibility of wider and more general application, and this country will always be receptive to suggestions for expanding these arrangements or otherwise improving the operation and efficiency of the inter- national payments system. All of this is ground for confidence—for making it increasingly clear that no extreme or restrictive measures are needed, that speculation against the dollar is losing its allure, and that the economy of the United States can continue to expand in a frame- work based on the maintenance of free exchange and the early achievement of equilibrium. The expansion in our domestic economy, while not all that we had hoped, has been substantial, and, of equal importance, it has been accompanied by price stability. Wholesale prices for industrial goods are actually lower today than they were during the recession months of 1961. Nevertheless, I do not underestimate the continuing challenge which faces us all together. The very success of our efforts—the very prosperity of those who have prospered—imposes upon us special obligations and special burdens. Centuries ago the essayist Burton referred with scorn to those who were "possessed by their money" rather than possessors of it. We who are meeting here today do not intend to be mastered by our money or by monetary problems. We intend to master them, with unity and with generosity, and we shall do so in the name of freedom.

©International Monetary Fund. Not for Redistribution OPENING ADDRESS BY THE CHAIRMAN OF THE BOARDS OF GOVERNORS, THE GOVERNOR FOR SAUDI ARABIA1 Ahmed Zaki Saad

Once again we meet in Washington, the seat of our institutions, to participate in the Annual Meetings of the Boards of Governors of the International Monetary Fund, the International Bank for Reconstruction and Development, the International Development Association, and the International Finance Corporation. I should like to welcome the honorable Governors, Alternate Governors, and Advisers of the member countries, the representa- tives of other international and regional organizations, and our distinguished guests. I also wish to extend special greetings and welcome to the honorable Governors of the new members who have joined our institutions during the past year. The many new countries which have already, or soon will, become members will broaden significantly the membership of our institutions. When one considers the increase in our ranks from 35 at the end of 1945 to 82 at the present time, with the prospect of 100 in the near future, it would seem that this is an appropriate time to pause and take stock of the situation and the problems we face today. When the Bretton Woods twins were organized, the stated purpose of the Fund was to promote international monetary cooperation and to facilitate the expansion and balanced growth of international trade. The Bank was to assist in the reconstruction and development of territories of the members by facilitating the investment of capital for productive purposes. These worthy i September 17, 1962. 6

©International Monetary Fund. Not for Redistribution ADDRESS BY CHAIRMAN OF BOARDS OF GOVERNORS 7 objectives would have but a hollow ring if, in fact, they were belied by the experience since the inception of the institutions. No one would claim that the objectives have been fully achieved. But the Fund and the Bank have properly assessed their tasks, and the record testifies to the success they have had in tackling those tasks. The assistance extended to its members by the Fund is both financial and technical. The Annual Report has amply covered the technical assistance role played by the Fund. The Fund holds annual consultations on the balance of payments and related problems with practically all of its members, whether they have exchange restrictions or not. The consultations papers have been favorably received by the authorities of the various members and have been commended for their high quality and deep analysis. Those of us who have studied the reports on consultations with the developing countries must have noticed that continuing inflation is still a major problem in many of them. Whatever the reason, many governments still find that monetary expansion is an easier road to travel when coping with budgetary and other difficulties than is the road of financial stability. It is understandable that countries with inadequate savings and resources should feel the need to find ways of increasing them for use both by the government and by the private economy. But, as this year's Fund Report states more vividly than before, much experience over many years has taught the simple lesson that inflation merely leads to a reduction and misuse of real resources and savings. Furthermore, the need to overcome inflation where it exists is heightened by the fact that some countries are achieving price stability. Indeed, in the United States there is now concern with such problems as unemployment and idle resources. In the developing countries, we cannot establish a basis for the economic growth which will raise living standards and bring hope to the masses unless governments have the wisdom and courage to bring continuing inflation to an end. Only then can an enduring basis be established for continuing growth. It is, therefore, gratifying to note the efforts which are made by the International Monetary Fund to find practical ways and means

©International Monetary Fund. Not for Redistribution 8 SUMMARY PROCEEDINGS, 1962 to help many developing members fight inflation. Difficult though it is to achieve success, we must not be discouraged. Setbacks are inevitable in any dynamic program with such a great diversity of countries and an ever-changing international economic, social, and political environment. The Fund is learning from these setbacks, as well as from the successes. What is important is patiently to help members to devise policies, to create financial institutions and tools, and to test and perfect them in the only feasible way—by trial and error in the field of action. Out of this growing and precious experience, the Fund should also continue and expand its campaign of public education in this much-debated and much- misunderstood field of financial stabilization. Another problem which has been revealed in consultations with members, and one which causes deep concern, is the ever-growing short-term and medium-term foreign debt of the developing members. Countries which are short of capital are understandably and frequently eager to accept foreign capital in all forms. However, the ability to service foreign debt, particularly of a short-term and medium-term character, is necessarily limited. We have now come to the situation where a number of the members of the Fund have a burden of foreign indebtedness which absorbs a large part of their total current foreign exchange earnings. The cost of excessive external borrowing is very high, in terms both of the prices of the commodities obtained in this way and of the rates of interest paid. Pushed too far, it leads to internal and external financial crises and drastic interruptions in the orderly process of growth. The International Bank and the Monetary Fund have not only made clear to countries the dangers of excessive foreign debt, particularly debt of a short-term character, but have also done much to bring about a healthier pattern of foreign debt and to reduce the burden on member countries. Apart from the annual consultations, the Fund has assigned many of its top staff to member countries, for periods ranging from a few days to several years, to help them in the formulation of appro- priate monetary and fiscal programs and policies. The Fund has also established a training program at its headquarters, particu- larly for the benefit of people from developing areas. Recently,

©International Monetary Fund. Not for Redistribution ADDRESS BY CHAIRMAN OF BOARDS OF GOVERNORS 9 the period of training has had to be shortened in order to increase the number of trainees who can be accepted. The developing countries attach great importance to these various forms of technical assistance. As the years pass, there will be an increasing demand both for technicians and for training. This will challenge the Fund to expand its facilities to meet this demand. The 1961-62 financial year has set a record in the Fund's history in every phase of operational activity. During this year, drawings and stand-by arrangements amounted to approximately the equivalent of US$4 billion and were granted to over 30 coun- tries. While these drawings reflected balance of payments difficulties experienced by a large number of members, they also reflected the ability and willingness of the Fund to be of major assistance to these countries. The Fund has become the one sure source to which countries turn when they need and can make effective use of short-term assistance. This is what was planned at Bretton Woods, and the Fund has been imaginative in evolving both techniques and policy for the use of its resources. This is a summary covering only a few of the activities of the Fund. You will undoubtedly hear more about this today from Mr. Jacobsson, the Chairman of the Executive Board of the Fund. The most striking feature of the past year's operations of the Bank, the International Development Association, and the Inter- national Finance Corporation is that together they committed more than $1 billion for new economic development projects in more than a score of member countries. This is indeed a milestone. The Bank's rate of lending reached nearly $900 million—a new record—and IFC and IDA together accounted for over $150 million. But the Executive Directors and Managements of the Bank group, in their Annual Reports of this record year, have also emphasized quite another aspect: the evolution of the entire Bank group of organizations into a comprehensive development instru- ment able to provide a wide range of services to member countries. I need not tell this audience that the amount of money lent is of great importance; but only if the loans are accompanied by proper

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planning and direction can the objectives of the developing countries be fully achieved. The Bank began purely as a financial institution designed to provide development funds. Its early loans were for postwar reconstruction and were made to a number of highly industrialized countries, possessing a high level of technical capacity. When the reconstruction phase ended in 1947, the Bank was faced with a quite different task: to provide funds to less developed countries with practically no industrial base and with few persons trained in modern technical skills. There was something of a pause in the World Bank's lending in the late forties and early fifties. This pause was not due to a shortage of funds, but was directly related to the fact that the many less developed member countries who wished to borrow from the Bank were not able quickly to prepare large-scale development projects in a form suitable for financing. Faced with this situation, the Bank embarked on a technical assistance program which has come to play a major role in the Bank's operations, paving the way for its loans. Today the Bank is able to help its member countries in many ways. It is equipped to send survey missions to analyze the development potential of member countries and to indicate the main frameworks of long-term development plans to suit particular needs of different areas. The Bank's experts on the marketing of securities have helped several countries to improve their machinery for the raising of local funds. The Bank has also helped to over- come difficulties encountered in the actual construction of large projects, such as special rock formations. In the field of develop- ment programing the Bank staff, assisted by consultants, is increasingly engaged in assisting member countries to draft and to improve both the objectives and the administration of long-term development plans. And there is also the valuable work of the Bank as a mediator in certain difficult international economic disputes. The evolution of all these services has been gradual, and I welcome this year's Report of the Bank because it brings them into sharp relief so that they can be better understood and appreciated. Moreover, it shows how the Bank has assisted in the

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creation of new financial institutions to meet new needs—the International Finance Corporation and the International Develop- ment Association. It has long been believed, and correctly, that the Bank's first great achievement was to demonstrate that the financing of economic development, if properly conducted, is sound business. It is now becoming clear that the Bank's second great contribution has been to demonstrate the value of providing technical assistance at every level and thereby increasing the ability of the less developed countries to absorb and use efficiently the external assistance which the Bank and other sources can provide. The International Development Association has also been committing its funds at a high rate: $134 million of new IDA development credits were signed during the fiscal year. Indeed, the value of IDA has become so clear that the Governors have before them proposals dealing with a possible increase in IDA's resources. This question is, perhaps, the most important matter coming up in the discussions regarding the Bank group of institutions at this Annual Meeting. The rationale of IDA finance is clear. The needs for finance of the less developed countries of the world are too large to be met by international loans on conventional terms. As I have mentioned, the annual debt service burden of many member countries has already reached a level which cannot be exceeded within the limits of prudence. If the flow of development finance is to continue to those countries, a much larger percentage must therefore be on terms such as IDA offers, which do not impose any immediate burden on the balance of payments of the borrowing countries. This means that the industrialized member countries of IDA are being asked to contribute regularly to an organization whose lending terms are such that there can be no significant return of the capital for many years. The issue here, while it is difficult, is also simple and straightforward. I believe that the international community of nations has to decide to adopt a long-term program whereby the developed countries of the world will provide to the less developed countries large amounts of development finance on easy repayment terms.

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The third member of the Bank group of organizations is the International Finance Corporation. Just a year ago, in order that the Corporation might fulfill its purposes more effectively, the Board of Governors took action to enable the Corporation to invest in capital stock. In consequence of this important change, the past year has been a period of readjustment for the Corporation. The Annual Report of the Corporation, which is before you, demonstrates in a gratifying manner that the Corporation is beginning to expand and diversify its activities in a way which indicates an accelerated pace and scale of operations in the future. This is encouraging to those who have followed the affairs of the Corporation since its inception and who believe in the importance of the private sector in balanced economic growth and in the opportunities that lie open to the Corporation to stimulate the employment of private investment capital. We should note with particular satisfaction the Corporation's first underwriting operation, the results of which augur well for similar operations in the future, and also the assumption by the Corporation of wider responsibilities in relation to development banks within the framework of the World Bank group. Especially, this latter function well illustrates the way in which the Corpo- ration's experience in the techniques of private investment, and its ability to work alongside private investors in equity financing, complement the activities of its sister institutions so that the group is strengthened and operates more effectively as a whole. The Corporation is still young and we may view its future with confidence. Mr. Jacobsson and Mr. Black will put before you a fuller survey of the activities of our institutions during the recent past. This brief record, however, is enough to show the impressive achieve- ments made to date. At the same time, we all know that the task is far from being fully discharged. There is a tremendous amount of work still to be done. In large areas of the world, per capita national income is far below minimum subsistence levels, and it is this woeful state of affairs which has given such impetus to the drive for economic development.

©International Monetary Fund. Not for Redistribution ADDRESS BY CHAIRMAN OF BOARDS OF GOVERNORS 13 Among the difficulties faced by the developing countries, as they press forward with development plans, are inadequate and fluctuating export receipts. Indeed, with prices of primary com- modities persistently weak, the inflow of development capital little more than offsets the weak trend of export earnings. The large number of developing countries which have sought help from the IMF is proof of the balance of payments difficulties that these countries are encountering. Many experts are today devoting considerable thought and ingenuity to solving the attendant prob- lems arising from price fluctuations of primary products and the tendency of some of these to decline markedly. These efforts are taking two complementary forms. One is to stabilize prices of major comodities, of which coffee is the most recent example. The other is financing of export fluctuations in the primary exporting countries. The IMF is an important source of compensatory financing. We have only to look at the magnitude of the drawings of primary producing countries in the last year or so, and the reasons for such drawings, to realize the importance of the Fund's compensatory role. Various proposals for additional compensatory facilities have been made by expert groups under the aegis of both the United Nations and the Organization of American States. All of these proposals are under active study by those institutions and by the International Monetary Fund. But one thing seems clear. There is nothing in the Articles of Agreement or the policies of the Fund, as outlined in the Annual Report, that precludes the Executive Directors, when they deem it fit, from waiving any terms or conditions laid down in the Articles governing the use of the Fund's resources. In this way, the Fund can offer its financial help in case of balance of payments difficulty arising from short- falls in export receipts. As a matter of fact, this has been the practice in numerous cases. Even in instances where the need for a stabilization program was clear, the Fund, in emergency situa- tions, has wisely extended its financial assistance first and successfully negotiated the stabilization program later. I am sure that with regard to the developing countries the Fund, without changing its Articles, can and will continue to adapt its

©International Monetary Fund. Not for Redistribution 14 SUMMARY PROCEEDINGS, 1962 policies to suit the particular case of each country. At the same time, it must be stressed that no scheme for use of the Fund's resources can be a substitute for the adoption of fiscal, monetary, and exchange policies which strengthen the balance of payments, permit a rebuilding of reserves, and encourage a larger inflow of capital. Closely linked with the question of shortfalls in export earnings of primary producing countries is that of commercial or trade policy. The less developed countries have had an increasingly smaller share of world trade. The trade gap between the industrial countries and the nonindustrial countries is constantly widening. The commercial policy of the industrial countries is of critical importance in this respect, as they are bound for many years to be the principal markets of the developing countries. Major impediments to the exports of the developing countries still remain in many of the industrial countries, particularly in the field of agricultural and industrial raw materials. It is futile to encourage development and growth without making provision for expanding international markets for the products of this develop- ment and growth. Increased export capacity without access to foreign markets can only lead to frustration and bitterness. We are all aware that a number of developing countries are concerned with the implications for them of the formation of the Common Market in Europe. More rapid growth in the industrial countries is to the advantage of all. However, care must be taken that access to these growing markets is available to all of our member countries. Ways and means must be diligently sought to reconcile the objectives of the Common Market with the needs of other countries. It is encouraging that in the industrial countries there are wide sectors of the population and many responsible government officials who recognize the problems of the developing countries. There is room for greater international cooperation in these matters, and in this cooperation I am confident that our institutions can play a most useful part. The enormity of the task of development is made more difficult by many other factors, of which two may be worth special mention: the population explosion, and the lack of adequate educational facilities for the great majority of the world inhabitants.

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In most developing countries the increase in population outpaces, and indeed nullifies, the increase in production, with a resulting deterioration in the standard of living. It is encouraging that countries are awakening to this danger and that solutions are being explored and tested. Much attention has been given to the need for material resources—capital and industrial materials—but of basic impor- tance are the people and their qualities. Uneducated, unhealthy, and apathetic people are great drawbacks to energetic development programs. General education and public health programs are essential to overcome these handicaps. It is gratifying to note that the Bank is working in cooperation with the UNESCO on projects which aim at extending loans for educational purposes. The Bank is also assigning more experts on education to make a very thorough study and survey of the ways in which the Bank could make funds available for the kind of education required in connection with the activities of the Bank, that is, education in engineering, managerial, or vocational fields. If most of my remarks have dealt with some problems of the developing countries, it is because I feel that their problems are acute and need all of our efforts and our continuous attention to tackle them. It is a source of satisfaction to see that a recent resolution by the United Nations General Assembly has designated the next ten years as the United Nations Development Decade. In view of this, many of my fellow Governors may wish to contribute to this effort by expressing any views they may have on how our institutions may be of further help. I am sure that their suggestions will serve as a guide to our Executive Directors and the Manage- ments in their future actions and practices.

©International Monetary Fund. Not for Redistribution PRESENTATION OF THE SEVENTEENTH ANNUAL REPORT x BY THE CHAIRMAN OF THE EXECUTIVE BOARD AND MANAGING DIRECTOR OF THE INTERNATIONAL MONETARY FUND

Per Jacobsson

In the year that has passed since we met in Vienna, the Fund has experienced a substantial increase in its membership. Eight countries have become members—Cyprus, Kuwait, Liberia, Senegal, Sierra Leone, Somalia, Tanganyika, and Togo, making a total of 82, and we are very glad to welcome them all here as members of our institution. Moreover, applications for membership are pending from a further 17 countries, so that the likelihood is that at the next Governors' meeting the membership will be nearly 100. It is, I believe, recognized by the newly independent countries that membership in the Fund and the Bank will ensure to them, quite apart from the financial and technical assistance which they may obtain, a degree of participation in the economic and financial life of the world which they could not otherwise achieve. For the Fund itself, this large membership opens up a wide field of action; but the Fund will, I am confident, continue to adapt itself to the changing circumstances, and be in a position to undertake the manifold new activities which this will involve. But before looking forward I would like, for a moment, to look back and say something about recent activities of the Fund. I want first to review the development of the Fund's policies and practices, which have been the object of intensive work in the Fund over the past few years. It was at the end of 1958 that 14 Western European countries decided to establish nonresident convertibility. The Governors' September 17, 1962. 16

©International Monetary Fund. Not for Redistribution OPENING ADDRESS BY MANAGING DIRECTOR 17 meetings in 1959 and 1960, as well as the Executive Board and the staff of the Fund in these years, devoted a great deal of energy to examining the implications of the move to convertibility for the international monetary system and for the activities of the Fund. Intensive discussions were held in 1960 with a number of countries that were considering the assumption of formal Article VIII status. These resulted, in February 1961, in 10 member countries in Europe accepting the obligations for convertibility of their curren- cies as set forth in Article VIII, which meant that thereafter the great bulk of international transactions were being conducted in currencies which were convertible under the Fund's Articles of Agreement. The Governors, particularly at the 1960 Annual Meeting here in Washington, had directed great attention to the new conditions arising from the return to convertibility. In the months following that Annual Meeting, the whole complex of problems referred to in the speeches by various Governors was very closely examined by the staff of the Fund, and on February 10, 1961 I made a statement in the Board of Executive Directors on the future activities of the Fund as affected by these new conditions. The problems discussed in that statement related to (1) access to the Fund's resources; (2) policies on the use of the Fund's resources; (3) currencies to be drawn; (4) replenishment of the Fund's resources through borrowing; and (5) capital trans- actions. In the year and a half that has passed since that statement was made, decisive progress has been made under each of these headings, as I shall now briefly report. As regards access to the Fund's resources, I believe that there has by now been sufficient experience to show that a country facing balance of payments problems, whether or not of an emer- gency character, can confidently turn to the Fund for assistance, and that financial institutions and, indeed, the exchange markets regard this as an appropriate course of action and an effective basis for the support of the country's currency. The Fund has not been reluctant in such circumstances to take the lead in assessing the country's economic and financial situation, and thus to provide an internationally recognized form of initiative and decision. On a number of occasions its own assistance has been

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supplemented by credits made available from other sources, and this has certainly been welcome. But, however useful the Fund's initiative may be, each contributor must form its own judgment of the adequacy of the measures proposed by the country concerned, and determine what credit facilities it is willing to extend. As to the use of the Fund's resources, the policies and practices laid down for the use of those resources have stood the test of practical application. It was specifically stated in the Report on the Enlargement of the Fund's Resources in 1958 that the princi- ples and practices on the use of the Fund's resources should not be changed as a consequence of the increase in quotas then envisaged, and these same principles and practices, after a further test of time, have been reconfirmed in the provisions of the borrowing arrangements, adopted by the Executive Directors in January 1962, to which I shall presently refer. The 1958 Annual Report emphasized that the Fund's policies must, at the same time, be alert to the needs of changing circumstances. As an example, I might mention that, whereas until recently financial assistance from the Fund had not gone beyond a total amount equal to 100 per cent of a member's quota, the Fund has now in several cases granted, or agreed to grant, assistance beyond that amount, up to 125 per cent. In this and in other matters under the Fund's charter, I am reminded of what an English Lord Chancellor, Lord Sankey, said of the Canadian Constitution. It was, he said, "a living tree capable of growth and expansion within its natural limits." If I may depart from the order of the points I mentioned earlier, I would now like to refer to the relation of the Fund's assistance to capital transactions. While the experience of many countries has shown that capital movements may be substantial even under systems of exchange restrictions, such movements can naturally assume even greater proportions under conditions of convertible currencies. Although the Fund's resources had been used in situa- tions involving capital transfers, there had been some uncertainty as to the extent to which, or the circumstances in which, the Fund's resources could be used for helping to meet those deficits in the balance of payments of members that go beyond the current account

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and are attributable in whole or in part to capital transfers. This uncertainty had arisen largely because of doubt as to the implica- tions of an early Fund decision on this matter. I recall that it was following a very useful suggestion of yours, Mr. Chairman, that the Executive Directors decided that it was necessary to clarify this whole matter. By a decision of July 1961, they were able to eliminate any doubt which had not already been dissipated by the practice of the Fund, that the Fund's resources can be used to alleviate pressures brought about by capital transfers, in accordance with the criteria of Article VI and other relevant provisions of the Fund Agreement. Thus, if a country facing a disequilibrating outflow of capital were to turn to the Fund for assistance, one of the criteria which the Fund would apply would be to satisfy itself (in accordance with accepted principles) that the appropriate measures were being taken to overcome the balance of payments difficulties, and that the assistance provided by the Fund would be repaid at the earliest opportunity, and in any event not later than three to five years after the drawing. It has, in fact, proved very useful that this matter was clarified, since in some recent important transactions of the Fund, capital transfers have been responsible for a considerable part of the pressure on the currencies which were supported. I need only mention the important Fund transactions in 1961 and 1962 with the United Kingdom, South Africa, Mexico, and Canada. In each of these cases the outflow has proved to be speedily reversible, thus confirming the Fund's judgment that the conditions laid down in the Articles of Agreement were entirely fulfilled. Turning now to the question of the replenishment of Fund resources by borrowing, the negotiations which were conducted after the Annual Meeting in Vienna last year led to arrangements under which the Fund will be entitled to borrow, under Article VII of the Fund Agreement, supplementary resources in the currencies of ten member countries, amounting to the equivalent of $6 billion in all. The decision taken by the Executive Directors on January 5, 1962 laid down the terms and conditions for such borrowing; and in an exchange of letters among themselves, the ten lending countries have set down the procedures they will

©International Monetary Fund. Not for Redistribution 20 SUMMARY PROCEEDINGS, 1962 follow in making the supplementary resources available to the Fund for the financing of particular Fund transactions for which such resources are considered necessary. The terms of the Fund decision provide for such matters as the procedure for making calls, the payment of interest, the issuance and transferability of evidences of indebtedness, repayment by the Fund, and the renew- ability of the arrangements. The borrowing arrangements will become effective when adher- ences are received from not less than seven participants representing maximum commitments totaling the equivalent of $5.5 billion. To date seven of the ten participants—the Governments of France, Italy, Japan, the Netherlands, and the United Kingdom, and the Deutsche Bundesbank and the Sveriges Riksbank—have communi- cated to the Fund their acceptance of maximum commitments totaling $3,650 million. The United States Congress has adopted the authorizing legislation for U.S. participation, and the appro- priation is at this moment being considered by the Congress. In the remaining two countries—Belgium and Canada—the Govern- ments are submitting requests for the necessary legislation to their respective Parliaments. I am glad to be able to report that the acceptance of the proposals for participation in the borrowing arrangements in the various Parliaments has been virtually unani- mous, and this, I think, may be regarded as a recognition of the importance of these arrangements as a significant means of strength- ening the world's monetary structure. The ten industrial countries which are partners to these arrangements are among the countries most likely to be affected by substantial short-term capital move- ments, and it is therefore natural that they in particular should have wanted these supplementary resources to become available in case of need. However, all Fund members have a fundamental interest in these arrangements because they are designed to enable the Fund to fulfill more effectively its role in a world of more and more convertible currencies. Moreover, the possibility of using supplementary resources to help to finance large Fund transactions will enhance the Fund's liquidity, and enable it to cope with other transactions within the framework of its basic policies. As soon as the borrowing arrangements have entered into force, which

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I am confident will be a matter of only a few days or weeks, the Fund will be even more clearly in a position to meet requests for financial assistance from all its members—large and small—even in situations when there are very substantial capital movements. It will thus be able to provide the time for the proper policy measures to be taken and to take effect in individual countries. Already, it seems, the knowledge that substantial resources may promptly be mobilized if and when required has had a canning effect on the exchange markets, so that the coming into force of the borrowing arrangements, together with other useful measures and developments, has cast its shadow before it. Finally, on the question of currencies to be used in Fund opera- tions, I would like to refer you to pages 36 to 41 of the Annual Report, where there is reproduced the statement adopted by the Executive Directors on July 20, 1962 on the appropriate currencies to be used in Fund transactions and in the repayment of sums drawn from the Fund. This statement is a considered recognition of a very important development over recent years, in which the spread of convertibility has made possible a broadening of the range of currencies usable for drawings and repurchases, and has thus led to a great increase in the liquidity of the Fund. At the moment, after large repurchases by the United Kingdom and a very substantial net inflow of dollars into the Fund, the Fund's holdings of dollars and sterling are close to 75 per cent of these countries' quotas, which means that the Fund's transactions now outstanding have their counterpart (apart from net sales of gold over the years) mainly in creditor positions of European currencies. By paying close attention to the balance of payments developments of the countries concerned, the Fund has increasingly been able so to arrange the currency composition of drawings and repur- chases as to take account of these developments and, for example, to offset short-term and sometimes speculative capital movements over the exchange markets. In this way it has contributed signifi- cantly toward achieving a more balanced over-all reserve position. Since the amount moving in and out of the Fund over the last two years has amounted to $5.5 billion, the aggregate effect has been not inconsiderable.

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The statement of the Executive Directors on currencies to be drawn and to be used in repurchases represents, to a great extent, a confirmation of practices which had been developed over the past few years. It is, however, expressly noted that "these practices are still in a state of evolution as increased experience is being gained." It is my belief that the same observation can be applied to a wider range of Fund activities, and even to the Fund as a whole. There has been and will continue to be in the Fund a lively awareness of changing world conditions as they affect monetary practices and policies, and I believe the Fund will continue to show the ability to cope with new developments as they emerge. Care has been taken to ensure that the arrangements made and the practices that have evolved have been consistent with the provisions and purposes of the Articles of Agreement; experience has shown us that these Articles, to a greater extent than is perhaps generally realized, serve as a basis for progressive action. Thanks to this experience and to the good will which has been shown by member countries, the effectiveness of the Fund has been greatly increased. For this to be done, much work and painstaking negotiations have been necessary, but results have been achieved which are within the range of practical politics. In the meanwhile, within the framework of these developing principles and practices, the Fund has continued to engage in a large number of transactions with member countries. In the 12 months preceding the opening of this meeting, no fewer than 26 members have received financial assistance, either through direct purchases of currencies or in the form of stand-by arrangements: 13 in Latin America, 4 in Europe, 2 in the Middle East, and 5 in the Far East, together with Canada and Ghana. Total purchases of currencies amounted to the equivalent of $678 million, while total repurchases were equivalent to $1,749 million. Under new stand-by arrangements granted by the Fund in the period, an amount of $1,579 million remains undrawn. The high figure for repurchases is largely explained by the fact that the drawing of the equivalent of $1.5 billion by the United Kingdom was repaid in full to the Fund within less than a year from the date of the drawing. As a precautionary measure, a new stand-by arrangement

©International Monetary Fund. Not for Redistribution OPENING ADDRESS BY MANAGING DIRECTOR 23 of $1 billion for one year was agreed to at the end of July, but it has not been drawn upon. Also as a precautionary measure, Japan in January entered into a stand-by arrangement of $305 million, no part of which has so far been utilized. A third industrial country which turned to the Fund in the course of the past year was Canada. First, early in May, it sought the Fund's concurrence in the establishment of a new par value for the Canadian dollar, after a period of ten years during which Canada had maintained a fluctuating rate system; and then in June, at a time of great pressure on its currency, it obtained a drawing from the Fund equivalent to $300 million. Simultaneously, Canada obtained from other sources the equivalent of a further $750 million, and all this assistance, together with the domestic measures taken, proved sufficient to reverse the trend on the exchange market, and has enabled Canada to replenish its foreign exchange reserves in an impressive way. Among nonindustrialized countries, comprehensive stabilization programs have been supported by the Fund in the Philippines, the Syrian Arab Republic, and the United Arab Republic, involving, in each of these countries, considerable progress toward a unified rate of exchange. Among the Latin American Republics, 11 made drawings on the Fund in the past 12 months and 2 concluded new stand-by arrangements which have not been drawn upon. It is perhaps not always realized what a variety of economic and financial conditions is found in Latin America, as in other developing countries, and this is noticeable not least in the monetary field. The Fund has been prompt in responding to requests for missions which have discussed with the authorities the problems of each particular country. The largest operation there this year has been the con- clusion of a stand-by arrangement of $100 million with Argentina in June, since when close contact has been maintained with the authorities in that country. There is, I believe, in these countries as in others, a growing realization of the advantages of maintaining monetary stability at realistic rates of exchange, which more than anything else arrests and reverses flight of capital and attracts foreign resources for development purposes.

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The variegated activities of the Fund are, of course, by no means limited to the granting of financial assistance; they are all fully described in the Annual Report which is before you, but I would like to mention just a few. In the first place, the Fund has jurisdictional powers with regard to par values and rates of exchange. I have just mentioned Canada's new par value. Israel in January this year, after detailed discussions with the Fund, also adopted a new par value, discarding its previous system of complex multiple rates. It did so without requesting the financial assistance of the Fund, being confident, as developments have borne out, that its reserves would steadily increase after the new par value had been fixed. Secondly, the annual consultations under Article XIV of the Fund Agreement, as well as those which are now conducted with Article VIII countries, form a very considerable part of the Fund's work. I think I can say that these consultations are welcomed by the countries with which they are conducted, not least because they provide an occasion for the members of the various government departments to make a comprehensive review of the country's economic and financial problems in close contact with interna- tionally trained experts. At the same time, the consultations provide the Fund with up-to-date information about developments in its various member countries and about the policy intentions of the authorities. It is difficult to imagine how the Fund could act so speedily, as it has repeatedly done in response to requests from its members, including requests for financial assistance, if it were not in possession of the information obtained through these annual consultations. Moreover, the consultations make it possible to form an over-all view of the world's economic and monetary prob- lems, which is as essential for the proper policy decisions by governments as it is for the proper conduct of the Fund's work, not least in furthering the general purposes laid down in Article I of the Fund Agreement. Finally, in the field of technical assistance, in addition to the annual consultations the Fund has over the last year provided technical advice and assistance to a large number of countries

©International Monetary Fund. Not for Redistribution OPENING ADDRESS BY MANAGING DIRECTOR 25 through resident advisors and in other ways. Such assistance has, indeed, in several cases been extended to countries which have applied for membership but have not yet become members of the Fund—one important case being that of the Congo, where the staff has been frequently consulted on a wide range of financial problems. In this connection, too, I should mention the Fund's expanding training program, under which officials from member countries attend courses of instruction provided by the Fund in its special spheres of activity. The contribution which the Fund can make in the field of training is a considerable one and capable of further extension in years to come, to the particular advantage, I think, of many new members. It is one of the advantages of the Fund that its financial assistance can be pinpointed precisely to those situations where difficulties in the balance of payments occur. The assistance helps the countries to take corrective measures and also helps to avoid the emergence of a chain reaction, which could set in if the situation were not taken in hand. These are both real contributions toward ensuring stability in the world's monetary system and toward the mainte- nance of an adequate level of liquidity. The twin problems of exchange stability and adequate liquidity have continued to be widely discussed in economic circles over the past 12 months. In these discussions I think it has been widely recognized that at the moment the facilities available for the financing of world trade, and the use made of these facilities, have been broadly satisfactory. After all, the value of world trade in the first half of this year was no less than 6i per cent higher than in the corresponding period of last year, and this could surely not have happened had adequate financing not been forthcoming. World trade is of course financed by credit in national currencies— very largely in the two reserve currencies, the dollar and sterling, but also in other currencies. It may be mentioned in passing that the so-called Euro-dollar and Euro-sterling markets have certainly made a contribution to the financing of transactions in the field of foreign trade, and from that point of view have been distinctly useful.

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The kind of liquidity so far referred to is in terms of national currencies. There is, however, another concept associated with the term liquidity (economic terms are unfortunately rarely unam- biguous), and that is the concept of international liquidity, which is concerned with the magnitude of monetary reserves, that is, the holdings of gold and foreign exchange by the various monetary authorities. For some time there has been much discussion whether or not there is an adequacy of monetary reserves, and the fear has been expressed that there might be competitive efforts on the part of many countries to increase their reserves, which would give rise to what has been called "a scramble for reserves" or "a scramble for international liquidity." I think that these fears are exaggerated out of all proportion to reality. It seems to me that after the redistri- bution of reserves which has occurred in the last few years, very much as a result of the deficit in the U.S. balance of payments, one industrial country after the other is beginning to think that its monetary reserves are sufficient from its balance of payments point of view. This change in attitude may prove to be very important, for it gives an increasing number of these countries the opportunity to shape their fiscal and credit policies without feeling a need to strengthen their reserve positions. It is true that many developing countries have very low reserves, but what these countries need most is long-term capital to finance their development programs. Although many of them would no doubt be wise to pay some attention to building up their reserves to a safer level, whatever efforts may be made by them to do so will presumably not cause any appreciable difficulties from a general liquidity point of view. But returning to the position of the industrial countries, there are certain basic developments which point to the restoration of a more enduring equilibrium between the economies of most of these countries. After the convulsion brought about by a world war, intensified in some cases by the changes in the postwar reconstruc- tion period, it is not easy to establish a harmony between costs and prices, or a proper money supply, or the appropriate conditions in the long- and short-term capital markets in the domestic

©International Monetary Fund. Not for Redistribution OPENING ADDRESS BY MANAGING DIRECTOR 27 economies of individual countries; it is even more difficult to attain this kind of equilibrium between the economies of different countries. Such an equilibrium was never really attained after the First World War; and after the Second World War there have been several periods of intense monetary tension, indicating the continuance of an unbalanced position. There have been certain indications, however, that we are now approaching what may well become a state of equilibrium solid enough to withstand the impact of such pressures as will never be wholly excluded. Thus, as far as changes in costs are concerned, resulting from the interrelation of wage rates and productivity, there has recently been little if any cost increase in most sectors of the U.S. economy, while in several European countries wages have risen noticeably more than produc- tivity, with a consequent pressure on costs. The difference has been sufficiently important to have an impact on the balances of pay- ments. As the realization of these facts spreads in ever-widening circles, confidence in currencies recently under pressure will be reinforced. Such a tendency is, I believe, being confirmed by the evolution of the foreign exchange markets, which, with the excep- tion of brief disturbances, have this year been characterized by greater calm than over any similar period since the war. Those who are in the habit of analyzing the significance of these various indicators are, I think, beginning to feel increasingly reas- sured that the present monetary structure can be effectively main- tained on a foundation of stable exchange rates, thus providing a reliable basis for further economic development and for the shap- ing of official policies. I do not want to imply that continued efforts are unnecessary, but I think that they can be pursued in an atmos- phere of greater confidence. And I also think that what has been achieved already may well come to exercise an influence on government policies and actions in a number of ways. Firstly, since a much better balance has been attained in the international payments situation, it follows that the extent of the remaining maladjustments in the cost and price and interest rate relations, as reflected in capital movements between indi- vidual countries, has been greatly reduced. Therefore, there is reason to believe that further corrective policies, insofar as they

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are still needed, will not have to be so extensive that their effects should prove too disturbing, nationally or internationally. Secondly, I believe that the efforts already made, and those which may still be required, will prove successful in assuring a stable exchange rate structure without any alteration in the present price of gold. The now ample monetary reserves of so many individual countries, together with possibilities of resorting to reciprocal central bank credits and ready access to the increased facilities of the International Monetary Fund, provide formidable lines of defense against any pressures that might arise in the future. Thirdly, with the improvement in the general situation, it should be possible to avoid policies which reflect a distrust in that situation and which might detract from the efforts to solve real problems. For this and other reasons I can, for instance, see no merit in building a system of extensive gold guarantees. Fourthly, in view of the improvement which has taken place, it seems that in many countries the monetary authorities could now regard fluctuations in the level of their monetary reserves with growing equanimity. The causes of whatever movements do occur in the reserves should, of course, continue to be analyzed and explained, but the fluctuations from week to week and month to month should no longer excite opinion to the same extent as they have done in recent years. The policies I have mentioned so far are primarily concerned with the maintenance of exchange stability, but what about the question of ensuring a sufficient degree of liquidity? As I have already mentioned, the liquidity required to finance world trade (as well as domestic trade) is in terms of national currencies. Thus the expansion of international trade is financed through the credit mechanism in individual countries. Under the old gold standard, the creation of credit in the individual countries was closely linked to movements of gold, and in quite a number of countries changes in the volume of credit have continued to depend to a large extent on changes in their balances of payments. But this link should not be so interpreted as to imply, for instance, that no increase

©International Monetary Fund. Not for Redistribution OPENING ADDRESS BY MANAGING DIRECTOR 29 in the credit volume could occur without an addition to monetary reserves. Here in the United States, credit has been expanding over the last ten years despite a considerable decline in the gold stock. In Germany, too, credit has expanded over the last two years without an increase in reserves. In many countries, modern techniques, not least through the initiation of open market opera- tions, have given greater flexibility to credit management than was possible previously. These techniques can of course be further adapted, and new instruments may be needed. The Fund is con- tinuing to examine this matter as part of its general study of questions connected with liquidity. But in matters of credit policy there are limits to the extent that countries can safely move alone; they have in a measure to keep in step with each other. Given present circumstances, in which there is a better basic balance in the world's payments situation and more and more industrial countries feel that they have by and large a sufficiency of reserves, there are more than ever good reasons to intensify the useful cooperation which has been initiated among monetary authorities. This cooperation can be pursued in a number of ways, all of which should be welcomed. What may be needed may not always be policies aimed in the same direction. Situations may arise in which different countries have to pursue contrasting but complementary policies, involving a more cautious policy in one country or one group of countries and a more expan- sionary policy in others. The choice of the right combination of policies should be the subject of common discussion and coordina- tion. But the object of all these efforts must be to provide in the individual countries, and thus for the world as a whole, the volume of credit creation required to meet the legitimate needs of growing economies. I cannot help adding that as monetary confidence increases, and I have every reason to expect that it will, there should be less eagerness on the part of private individuals to hoard gold. One consequence of reduced hoarding would be that more and more of the current gold output, which has been increasing from year to year, would become available for monetary purposes, and this in turn would facilitate the pursuit of appropriate credit policies.

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Cooperation among monetary authorities does not, of course, mean that gold is discarded as a basis for currencies; it can still play a useful role in the pursuit of credit policies in the framework of a managed gold standard. I want to stress that the endeavors to establish fiscal and credit policies answering the needs of growing economies will benefit not a limited group of countries but all countries. I have already pointed out that there is at the moment a sufficiency of liquidity, and in that connection I referred to the increase of 6i per cent in the value of world trade in the first half of 1962 over the similar period in 1961. It is interesting to note that preliminary estimates indicate that the exports of the primary producing countries rose at about the same rate as those of the industrial countries; the imports of the primary producing countries as a group increased much less. There has thus been a welcome expansion of trade in primary products. One of the most pressing problems confronting the developing countries, and not least the newly independent countries in Africa and elsewhere, is the need for them to pay particular attention, in the development of their economies, to the promotion of exports. Certainly these countries would all be greatly helped by a reduction of artificial barriers impeding the free flow of trade and payments with other countries, and by mutual arrangements designed to make the best possible use of the scarce resources at their disposal. For the newly independent nations there is a clear advantage in close economic and monetary cooperation among countries that his- torically have belonged to the same currency and trading area, and even among those that have belonged to different currency and trading areas. It is particularly important that these nations, whose economies have traditionally been joined in economic union with some of their neighbors, should not relinquish the very real advantages derived from the historical absence of barriers and from the existence of common currencies and institutions, which make it possible to pursue a coordinated development effort for the benefit of all the participants. But while it is the responsibility of the developing countries to pursue policies which facilitate exports, it is, at the same time, the responsibility of the industrial

©International Monetary Fund. Not for Redistribution OPENING ADDRESS BY MANAGING DIRECTOR 31 countries to pursue liberal trade policies, opening their markets to imports from less developed areas. By such policies they would in a constructive way contribute to the welfare of the developing nations, old and new. Moreover, I want to point out that the cooperation to which I have referred among the monetary authorities should, as one of its beneficial effects, ensure the avoidance of deflation at a time of greatly increased capacity in so many lines of production. The success of enlightened fiscal and credit policies in the industrial countries should indeed be very much to the advantage of the primary producing countries. There has been a growing awareness of the difficulties which a number of primary producing countries have experienced through the fluctuations in the prices of their main products, and the Fund has been connected in various ways with the examination of these problems. Assuming, as I think we may, that it will be possible to avoid any marked decline in the present general level of raw material prices, there may still arise acute difficulties for individual products, such as have occurred in the case of coffee, now being intensively discussed, and these difficulties will create serious problems for the producing countries. For those products, special commodity arrangements may well be necessary. Such arrangements should, of course, be designed to facilitate rather than to discourage the diversification of exports. But even if all this is done, it is to be expected that wider prob- lems arising from their over-all balance of payments position will affect a great many of the developing countries. Experience shows that the causes of such difficulties as can arise are of a great variety; it follows from this that there is great merit in analyzing each particular situation. When balances of payments are involved, naturally the Fund has a special responsibility, which will demand increasing attention; and I am sure that this will be given. Over the years, the Fund has had increasingly intimate contact with the developing countries. While the Fund's financial assistance is related to balance of payments problems, and is repayable within not more than three to five years, the requirements for the financing of development programs are, of course, of another

©International Monetary Fund. Not for Redistribution 32 SUMMARY PROCEEDINGS, 1962 character, long-term resources being needed, largely related to specific programs. But this does not mean that the Fund is not interested in the whole complex of these problems; to mention only one aspect, both internal and external financing of develop- ment have obvious monetary repercussions. Concentration on noninflationary sources of financing is more and more found to be the key to sound development; and fiscal and credit policies are therefore essential elements in development planning. As the Annual Report points out, experience has shown time and again that an attempt to promote development by inflationary financing almost inevitably brings in its wake a flight of domestic savings and diversion of investment into nonessential lines, a reduction in capital inflow, a decline in export earnings, and distortions in the economy, all of which lead to a discouragement rather than an encouragement of the healthy economic growth which is a basic objective of the Fund's work. One of the new forms for providing financial assistance to developing countries has been the formation of consortia under the leadership of the International Bank for Reconstruction and Devel- opment, and also the Organization for Economic Cooperation and Development. Fund officials have taken part as observers in meet- ings of these consortia. It seems natural that in the future the Fund, pursuant to its purposes, will become more closely associated with these endeavors, and generally with development efforts. In the whole of this area we are faced with many new problems, which will present many difficulties. But thorough examination of each situation in an international setting would seem to provide the greatest assurance that economic considerations will prevail; and thus waste will be avoided. In that way the great efforts now in train to ensure a steady expansion in individual countries, and therefore also in the world economy, would attain their maximum effectiveness. In this review, I have touched on many difficult problems in the fields of action with which the Board of Governors meeting here today is concerned—mentioning some of the achievements and also some of the problems with which we are still faced. Whatever the difficulties that are already present or that may loom on the

©International Monetary Fund. Not for Redistribution OPENING ADDRESS BY MANAGING DIRECTOR 33 horizon, there is in my opinion no need to be pessimistic. Let us not overlook the very constructive developments that have taken place since we met in Vienna a year ago. The borrowing arrange- ments providing the Fund with supplementary resources will very shortly enter into effect, and cooperation in other ways among monetary authorities has been strengthened. Trade has continued to be liberalized, and world trade continues to increase. New consortia for financing development programs have been formed, and the flow of assistance is, I think, increasing. The possibilities of further action are certainly not exhausted. We can take heart at the progress that has been made, and again at this meeting give a demonstration of a firm resolve to mobilize and manage economic and financial resources internationally for the improvement of the conditions in our individual member countries, and therefore for mankind in general.

©International Monetary Fund. Not for Redistribution DISCUSSION OF THE SEVENTEENTH ANNUAL REPORT 1 STATEMENT BY THE GOVERNOR FOR TURKEY

Ekrem Alican

It is a great pleasure and honor for me to participate personally, for the second time, in one of the Fund's Annual Meetings, which I believe will benefit all member countries. It is also a privilege and satisfaction for me to have the oppor- tunity, here in this distinguished gathering, to express our thanks and appreciation to the management of the International Monetary Fund, and especially to Mr. Jacobsson and Mr. Cochran and their colleagues, for their never-failing interest and assistance to our country and for their understanding of our problems during all the years of close collaboration with the Fund. We have learned that Mr. Cochran will be retiring on October 31 of this year from his present job in which he has so competently served since 1953. It is a source of regret for us to be deprived of his valuable collaboration which we enjoyed for so many years, and I sincerely wish him the same success in the future. The Annual Report, which is so ably prepared as in the past years, gives us a very clear picture of the international monetary situation and of the Fund's achievements toward the attainment of balance in external payments, monetary stability, and develop- ment of the productive resources in all member countries. The past year, as reflected in the Annual Report, witnessed a general easing in the payments problems of the world, although there were some factors which tend to increase the imbalance in international payments. 1 September 19, 1962. 34

©International Monetary Fund. Not for Redistribution GOVERNOR FOR TURKEY 35 The world industrial production rose somewhat steadily, but at a slower rate as compared with the previous year. World trade also increased in much the same manner. In short, the year was one of general expansion in the industrial countries. Yet, the past year was again a difficult year for the less developed primary producing countries. This was mostly attributable to the decline in the prices of the primary products on which the hopes of these less developed countries are based for foreign exchange earnings. Short-term difficulties of these countries, including my country, have been overcome by the availability of the Fund's resources as in the previous years. But if such countries want to achieve sustained development, short-term measures will not be a remedy. Instead, long-term measures will be needed, as has been compre- hensively noted in the Annual Report before us. Now I am quoting from the Report, "The postponement for a relatively short period by means of credit, of the impact of balance of payments difficulties is of limited value to a country unless there is a reasonable expecta- tion that its exports will recover or its import demand will decline. . . . For the improvement of their position, the less developed countries will mainly need to achieve a long-run strength- ening and broadening of their economies. A no less important condition for sustained development ... is that the economy be provided with the solid foundation of sound monetary and fiscal policies. . . ." We are happy to observe that this view is also shared by the Chairman and the Managing Director and was strongly and con- vincingly expressed in their wise opening speeches. Now, in this context, being convinced of this line of thinking, I wish to take the liberty of stating very briefly our achievements and plans in Turkey looking toward the attainment of development under stable conditions. During the 1960 Annual Meeting here in Washington, I had stated that Turkey was "continuing with determination to imple- ment the stabilization program adopted in 1958 in collaboration with the Fund and OEEC," and I had added, "The Turkish Govern-

©International Monetary Fund. Not for Redistribution 36 SUMMARY PROCEEDINGS, 1962 ment has taken a series of measures in recent months designed to achieve internal stability." Now I can say with satisfaction that in my country the imple- mentation of the stabilization program was a success in creating a sound basis for a planned development. As it is expressly stated in the Program of the new Turkish Coalition Cabinet, the main goal of our Government is to continue its efforts for a sustained development under stable conditions and in conformity with sound planning. An average growth rate of 7 per cent per annum has been set as a target. To this end, the level of investments will be increased without recourse to infla- tionary measures. Our exports will be promoted and foreign invest- ments will be encouraged. Already certain measures have been taken to ease exchange control. Our Five Year Development Plan, which covers the period of 1963-67, has been adopted by the Cabinet and is about to be presented to the Grand National Assembly. It would be worthwhile to mention that these goals have been accepted and will be implemented firmly by the Coalition Govern- ment, composed of the representatives of three political parties. A consortium to finance our Five Year Development Plan has already been established by OECD with the participation of friendly capital exporting countries. This we interpret as an indication of wholehearted support of our economic well-being. Before concluding my remarks, I would like to take this oppor- tunity to reaffirm our confidence in the continuing success of the Fund and our appreciation for the assistance and support rendered to our country by the Fund up to now. I would like to express our sincere hopes and wishes for the progress and prosperity of fellow nations participating in this distinguished meeting.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR SIERRA LEONE 37 STATEMENT BY THE GOVERNOR FOR SIERRA LEONE A. M. Margai

At this Seventeenth Annual Meeting, I bring to the member countries of the Bank and its associates greetings and wishes of continued progress from the Government and people of Sierra Leone. It was at the last Annual Meeting in Vienna that the Boards of Governors passed resolutions setting forth the terms and condi- tions under which Sierra Leone could be admitted to membership in these organizations. These terms and conditions having been complied with, we feel greatly honored that I am able to take my place at this meeting as a Governor, together with representatives of other newly independent countries. Sierra Leone is a very small country and our national income is small by Western standards; nevertheless, with the aid of our meager but diverse mineral and agricultural resources, we have a history of economic and financial stability of which we are justly proud. Our Government is based on sound democratic principles adher- ing to the Charter of the United Nations, of which we are the one hundredth member, and, by any standard, we respect the liberty of the individual as well as freedom of speech. In the commercial field, we pursue an open door policy. This, coupled with attractive tax concessions and our democratic system of government, provide conditions that are conducive to external investment. We have, during the past years, followed with keen interest the activities of the Fund and the Bank in other parts of the world. Last year, a mission from the Fund visited Sierra Leone for a brief period. This year, a mission from the Bank visited Sierra Leone in May and conducted a preliminary survey of our social and economic needs. For the interest thus manifested in our welfare at a time when we had not become members of these organizations, we are truly grateful.

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We are fully convinced that political independence without economic independence is a sham, and that it is imperative to create conditions and establish institutions which foster economic growth and stability. To this end, we have drawn up a Ten Year Economic and Social Development Plan to cover the period 1962/63 to 1971/72. The cost of financing the Plan will be met partly from our own revenues and partly, it is hoped, by assistance sought from the Bank and its affiliates and from friendly countries. We have also decided to establish a National Bank, which will not only issue and manage our currency, but will carry out all other activities expected of a central bank, thus playing a major and increasingly active role in the economic and financial life of our country. . . .

STATEMENT BY THE GOVERNOR FOR THE UNITED STATES

Douglas Dillon

First of all, I wish to pay tribute to our retiring Deputy Managing Director, Mr. Merle Cochran. His long diplomatic and financial experience has been an important element in the Fund's success, and his vigor and impartiality have enhanced its high standards. The Annual Report makes clear that the International Monetary Fund has had an exceptionally active and successful year. That is evident from the statistical summary of the Fund's operations— total drawings by 22 countries of $2.2 billion spread over 10 different currencies, and repurchases of $1.3 billion. It is also evident in the continued growth of the Fund's membership. I should like to welcome the new members who have joined since we met in Vienna—Cyprus, Kuwait, Liberia, Senegal, Sierra Leone, Somalia, Tanganyika, and Togo—and to express my pleasure over the large number of pending applications for membership, of which many are on our agenda. One basic function of our international monetary system is to assure the time and resources necessary to facilitate the adjustments that are an inevitable consequence of economic change and

©International Monetary Fund. Not for Redistribution GOVERNOR FOR UNITED STATES 39

progress. But, no matter how soundly conceived and operated, no monetary arrangement can absolve a country of the responsibilities that go hand in hand with the benefits of participating in world trade and investment. That is why the first order of business for each of us must be the development of programs that combine external financial equilibrium with economic growth at home. There are no simple prescriptions that can be readily utilized at all times and by every country. That is recognized by the United States, which experienced relatively slow growth and sizable external deficits during the later 1950's. We are now attacking both of these problems with vigor, and the results are encouraging. Since the end of the mild recession 18 months ago, the value of total output has expanded by more than $55 billion, or roughly 11 per cent. Unemployment has been appreciably reduced. At the same time, increases in average wage rates in manufacturing— roughly 3 per cent per year—have been smaller than during other postwar recoveries, and have remained within the limits of rising productivity. Prices for manufactured goods are now slightly lower than during the recession months of 1961—and, in fact, have remained virtually stable for four years. Although our economy continues to move steadily ahead unmarred by the excesses that characterized earlier periods of expansion, we are not satisfied. The rate of investment in new productive facilities has continued to lag, and we still have too many idle human and physical resources. To meet our obligations to ourselves and to other nations, we must put those idle resources to work—and we must do so in ways that will add to our productive efficiency and reinforce the prospects for price stability. Broad agreement has developed among our citizens that one of the keys to progress is tax reform—reform designed to stimulate investment and to release the brakes on growth inherent in our present rate structure. A good beginning has already been made. The tax treatment of depreciation has been thoroughly modernized. A 7 per cent tax credit—similar to the investment allowances now used in many other countries—has been approved by both Houses of our Congress and is expected to become law shortly. Together,

©International Monetary Fund. Not for Redistribution 40 SUMMARY PROCEEDINGS, 1962 and for the first time in many years, these reforms will place invest- ment in new equipment in the United States—so far as taxes are a factor—on a basis roughly comparable to that in the other indus- trialized countries. We intend to submit the remainder of the tax reform program to Congress in January at the start of its next session. Although we had hoped for a balanced budget in the current fiscal year, ending next June 30, we now recognize that another moderate budget deficit appears likely. Because our business recovery has not moved as rapidly as we had anticipated, revenues will fall below projected levels. However, the currently envisaged deficit, accompanied by appropriate monetary and debt manage- ment policies, should not give rise to fears of inflation. For our problem is not excessive demand and scarce resources, but rather excess capacity, too much unemployment, and a tax structure that has become a drag on productivity, new investment, and growth. With this in mind, the basic aim of our monetary and debt management policies over the past year has been to assure an ample supply of credit to support domestic expansion, while simul- taneously maintaining a rough equality between the return available on short-term investments in the United States and in the leading money markets abroad. We have concentrated the bulk of new Treasury borrowing in the short-term area of the market, and, as a result, key short-term rates are now a full half of 1 per cent higher than a year ago. Meanwhile, funds for productive long-term investment have remained in ample supply. And long-term rates for corporate bonds, mortgages, and state and local government securities—which have a far more important relationship to domes- tic investment—have held at or below the levels to which they had declined in the recession months of 1961. While concentrating our new cash borrowing in the short-term area, we have, at the same time, undertaken a significant restruc- turing of the outstanding federal debt. The slow but steady shorten- ing of the average maturity of the marketable debt that had proceeded throughout the 1950's has been reversed. After allowing for the effects of last week's advance refunding, the average length

©International Monetary Fund. Not for Redistribution GOVERNOR FOR UNITED STATES 41 of the debt has been increased by 20 per cent since January 1960. The general public now has more of its funds in government bonds of longer than 20-year maturity than at any time since the early fifties. We have not jeopardized prospects for price stability by monetizing excessive amounts of debt through the banking system. The money supply—demand deposits and currency—is today less than 2 per cent larger than a year ago—certainly no cause for inflationary concern during a period in which over-all economic activity has risen by some 6 per cent. As we move ahead in financing the current budget deficit, we will continue to tap a cross section of the vast amount of funds becom- ing available in the market. Some of those funds will come from the rapidly growing savings accounts in our commercial banks. Some will represent a prudent increase in the money supply, as our productive capacity increases. Meanwhile, the Treasury will con- tinue to seek opportunities for placing longer-term bonds with individuals and with investment institutions. That should not be interpreted as an intention to press ahead with long-term financing, or to constrict the money supply, to the point of impeding the availability of funds for business investment. Should the economic advance generate a growing and buoyant demand for funds for domestic investment, with consequent pres- sures on the supply of resources, a moderate rise in long-term interest rates would be a natural and appropriate response. But a blunt effort at this time to push long-term rates up, in an attempt to crowd out of our markets some marginal amount of foreign borrowing, seems to me both contrary to the needs of the free world for an expanding economy in the United States and quite futile in terms of our balance of payments. It is true that a sizable number of foreign securities have been floated in the New York market this year. However, such borrowing is attracted as much by our well-developed market facilities and by our complete freedom from controls as by relatively small differences in over-all interest costs to borrowers—costs that for many foreign offerings have run to 6 per cent or more. I have suggested on other occasions that the fundamental, long-run solu- tion to the anomaly apparent today—with borrowers in some of

©International Monetary Fund. Not for Redistribution 42 SUMMARY PROCEEDINGS, 1962 the surplus countries seeking credit in a deficit country—lies in the further development of the capital markets in Western Europe and the abandonment of outmoded controls and restrictions on the free flow of capital that still are far too prevalent. Imposition of capital controls by the United States would not be a satisfactory solution. It would be contrary to all that we have been striving for in freeing trade and payments between countries. It would not be in keeping with our special responsibilities as custodian of a reserve currency. And it would be contrary to our own long-run interest in ensuring that funds move to where they will be used most productively. The magnitude of this type of portfolio investment, in relation to our balance of payments, should not be overstated. Foreign bonds and notes totaling just under $600 million were sold in our market during the first six months of this year. Of this amount, as much as one third was for the purpose of refunding other dollar obligations. Often a quarter—and sometimes much more—of the individual issues were taken up by investors abroad: one indication that it is market facilities as much as long-term rate differentials that tend to attract these issues to the New York market. Moreover, in some cases, the new funds raised have been used for investment in productive facilities in this country or for purchases of American goods and services. At the same time, in cooperation with some of the principal surplus countries, a reverse capital flow has developed in the form of prepayments of debt owed to the United States—a flow that so far this year has totaled nearly $550 million from France, Italy, and Sweden. And it is also worth pointing out that the return flow of earnings from our rapidly growing private investments abroad, which now amount to nearly $60 billion, was running at an annual rate of $3.6 billion during the first half of this year—$300 million higher than in 1961, and $1.1 billion higher than just four years ago in 1958. So far as our over-all balance of payments is concerned, further improvement has been apparent. The deficit for the first eight months of the year ran at an annual rate somewhat over $1.5 billion,

©International Monetary Fund. Not for Redistribution GOVERNOR FOR UNITED STATES 43 in contrast to last year's $2.5 billion, and to the average of $3.7 billion during the years 1958-60. These eight-month results were influenced both by a substantial inflow of Canadian funds during the first half of the year and by a sharp reversal of these flows during July and August. A particularly encouraging development for the longer run has been our ability to maintain a decidedly favorable balance of trade, even while domestic recovery was generating a sizable increase in our imports. An important factor, of course, has been price stability which laid the foundation for the increase of 6i per cent which we achieved in our exports during the first half of this year as compared to the same period a year ago. We intend to continue to strengthen the competitive capacity of our industry over the coming years. That is one of the chief reasons why our tax program has placed so much emphasis on improving the climate for productive investment. In recent years, our military effort in defense of the free world has resulted in a net balance of payments outflow averaging roughly $2.6 billion a year. Through our own economies, and arrangements for the procurement of additional American equipment and services by our allies, that figure will drop to about $1.75 billion in 1962. We firmly intend to bring about substantial further reductions over the next few years. Our intention reflects our conviction that a more equitable sharing of these defense burdens can and must be reached. Our economic assistance programs total about $4 billion a year. We are aiming to provide 80 per cent of that aid in the form of United States goods and services, as compared with an average of about two thirds in recent years. Meanwhile, we look to other industrialized free nations to provide a fair share of the expanding needs for development assistance. The reduction in dollar outflows that is being achieved by these and other government actions, together with the growing returns from our overseas investments and the improved competitive position of our exports, underlies our goal of the early achievement of balance in our international payments.

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Progress toward a basic equilibrium in the payments position of deficit and surplus countries alike is the true foundation for any lasting international monetary stability, but alone it is not enough. We must also be prepared to cope with those sudden, and potentially large, movements of short-term funds that can be set off, often with little or no warning, by a variety of influences. This is partly a matter of the amount of international liquidity that exists at a given time, which in turn rests on our joint ability to maintain the usefulness of key currencies, side by side with gold itself. But equally important, it is essential that we have the facilities for quickly mobilizing additional resources, when and as they are required, and applying them effectively at the point of need. That is the significance of the special borrowing arrangements which are being established through the Fund by a number of the industrialized countries. We expect to receive final approval of these arrangements for the United States from our Congress before the end of the current legislative session. Thanks to earlier action by other participating countries, the agreements will then become effective. Meawhile, we have initiated actions in other directions to reinforce the defenses of our monetary system, supplementing and complementing the facilities available through the Fund. These new initiatives started more than a year ago, when the United States for the first time in a generation began to intervene in the foreign exchange markets and to hold convertible foreign currencies as a part of its international reserves. Working closely with other coun- tries, various techniques have been carefully tested in a wide variety of situations. Their usefulness for dealing with incipient disturbances in the exchange markets and unusual swings of short-term money has, I believe, now become clear to all. The amounts of convertible currencies presently at the disposal of the United States, largely as a result of reciprocal currency agree- ments and direct Treasury borrowing, are not inconsequential. They amount to approximately $900 million in cash or stand-by facilities. Should large and potentially disruptive flows of funds actually develop, these facilities could be further enlarged. In addition, should the need arise, the United States is also prepared,

©International Monetary Fund. Not for Redistribution GOVERNOR FOR UNITED STATES 45 in concert with other affected countries, to provide forward exchange to the market, thereby facilitating the holding by private parties abroad of dollars that have passed into their hands for what may prove eventually to have been a temporary period. In these ways, a pattern has been established for prompt and effective international action to meet unusual pressures when and if they develop, and to contain and diffuse their impact. The potential value of such cooperative arrangements was vividly demonstrated by the experience in 1961 when sterling was under heavy pressure. More recently, the shock of the temporary Canadian difficulties and the potentially disturbing effects of the sharp break in the stock markets of the United States and other industrialized countries this spring were accommodated smoothly and effectively. Responsible cooperation among monetary authorities has also borne fruit in new techniques for handling transactions on the London gold market so that it may better fulfill its basic purpose of providing a workable and flexible mechanism for distributing the supply of newly mined gold. It is clear that temporary and erratic fluctuations in the market price of gold in response to real or fancied political and economic developments serve no legitimate interest. It is equally clear that it does not serve the interests of the official participants in the market to engage in transactions in ignorance of their implications for each other. That is why the authorities of a number of countries have begun to exchange information and to coordinate their operations in the gold market—not on the basis of hard and fast rules, but in accord- ance with common understandings reached in frequent consulta- tions. The object is to contain within a reasonable range those fluctuations which occur in response to passing influences—to emphasize that the private purchase of gold is unlikely to yield speculative profits and instead can be expected to be a costly and unrewarding use of funds. In all these ways, we are justified in looking back upon the past year as a period of striking progress in strengthening our interna- tional monetary system—a system that, in the last analysis, rests firmly on the maintenance of the dollar at its present gold value as a key reserve and trading currency.

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But, necessary as it has been to strengthen the defenses against temporary swings of short-term funds, we must not allow progress in this area to divert our attention from the fundamental need to achieve an over-all equilibrium in basic trade and investment flows. For the United States, this requires continued and vigorous effort in many directions. We must maintain and improve the competitive position of our exports through price stability at home and aggressive selling abroad. We must also continue to reduce the dollar flows associated with our defense effort overseas and with our widespread economic assistance programs. Continued effort is also required by the surplus countries to open their markets to foreign products and borrowers, to minimize the foreign exchange costs of our defense deployments, and to assume a fairer share of the burden of economic assistance. Those are the basic challenges of the day. They are challenges that can and must be met. They can, of course, be met most readily by cooperative action among nations. But we recognize that in the final analysis, each nation must accept the responsibility for taking the actions needed to maintain the soundness of its own currency in international markets. This we in the United States are fully prepared to do, in the knowledge that a sound dollar is essential not only for us at home, but also for the continued and healthy growth of trade and commerce throughout the entire free world.

STATEMENT BY THE GOVERNOR FOR CANADA

Donald M. Fleming

The past year has been an unusually eventful and important period in Canada's relationships with the International Monetary Fund. Following the Annual Meeting in Vienna last year, Canada took part in a series of discussions on the provision of supplementary resources for the Fund. When the formal decision on arrangements for Fund borrowing of supplementary resources was taken, Canada

©International Monetary Fund. Not for Redistribution GOVERNOR FOR CANADA 47 undertook to participate to the extent of US$200 million. Parlia- ment will be asked at its forthcoming Session which begins next week to enact the necessary legislation. Last November the Fund held its first full-scale consultation with Canada. This took place under the procedures recently adopted for consultations between the Fund and countries operat- ing under Article VIII. We were pleased to welcome to Ottawa an able and well-informed staff mission, with whom we had frank and intensive discussions. On May 2, Canada adopted a new par value for the Canadian dollar at 92.5 cents in terms of United States currency, thus bringing to an end the fluctuating rate system which had been in effect since 1950, and bringing Canada back into full conformity with Article IV. This step was warmly welcomed by the Fund. Finally, Canada found it necessary on June 24 to call upon the Fund's resources for the first time, and made a drawing of several currencies in an amount equivalent to US$300 million. To put these events in perspective, and particularly to explain the nature of the emergency which arose in June, I should like to review very briefly the economic and financial background. During the decade after the war, world demand for Canadian basic materials and other exports was very strong, and there was heavy investment in the development of our resources. The Canad- ian dollar, which, after previous difficulties in determining a parity, had been responsive to market forces since 1950, rose to a sub- stantial premium in terms of the United States dollar. As long as the external demand for our products and the pressure on our resources was maintained, the relatively high value of our currency was helpful in restraining inflationary pressures. However, when world demand for our products eased, and our economic growth became less rapid, the exchange rate failed to move down to a level more appropriate to our economic circumstances. Buoyed up by a continuing and substantial capital inflow, the high exchange rate impaired the international competitive position of Canadian industries, and was an important factor in our inability fully to absorb our rapidly expanding labor force. Unemployment rose

©International Monetary Fund. Not for Redistribution 48 SUMMARY PROCEEDINGS, 1962 and was aggravated by heavy deficits on international current account. For some years we imported annually from abroad more than a billion dollars worth of goods and services in excess of our exports. As a central element in its program to encourage economic growth and redress our international current deficit, the Canadian Government in 1960 and 1961 took a series of steps to facilitate an orderly movement of the exchange rate to a more appropriate level. These steps included the removal of certain special incentives to capital movements and a number of measures designed to make it more attractive for Canadian borrowers to draw upon Canadian savings instead of seeking funds abroad. In my budget statement in June 1961, I indicated that, as these measures might take some time to achieve their purpose, the Exchange Fund would, if necessary, be used to purchase foreign exchange and thus influence the rate. As it turned out, this was not necessary. For most of the period between June 1961 and May 1962, the Canadian dollar moved within the range of 3 to 5 per cent discount on the United States dollar and the Exchange Fund's interventions continued to be directed toward moderating movements in the rate, not toward bringing such movements about. In April of this year, however, it had become clear that there was considerable uncertainty in the exchange market and that this was giving rise to speculative pressures. In these circumstances, the Government concluded that the time had come to declare a par value and give those engaged in international transactions the advantages and security of a fixed rate of exchange. We knew, of course, from our earlier consultations with the Fund, that such a step would be greatly welcomed by the Fund and its member countries. The return to a fixed par value on May 2 resulted in a marked firming in the exchange market for the Canadian dollar. A period of stable market conditions followed the return to a par value. This gave way, however, in mid-June, to an increasing degree of uncertainty and instability which intensified to a point where a comprehensive program of emergency action was essential. The large inflow of capital, which for many years had financed

©International Monetary Fund. Not for Redistribution GOVERNOR FOR CANADA 49 and supported a large and, latterly, an undesirably large deficit in our current account balance, had dried up, and had actually been replaced by a speculative capital outflow of substantial proportions. The emergency program announced by the Prime Minister, Mr. Diefenbaker, on June 24 included measures designed to have a direct effect on the current account, to increase our holdings of foreign exchange, to reduce the Government's budgetary deficit, and generally to restore confidence and revive the appropriate capital inflow. To reinforce the exchange reserves, which had fallen by about 50 per cent, to $1,100 million, the Government drew $300 million from the International Monetary Fund and arranged a line of credit with the United States Export-Import Bank of $400 million. The Bank of Canada entered into reciprocal currency arrangement with the United States Federal Reserve System in the amount of $250 million and made a comparable arrangement with the Bank of England in the amount of $100 million. I should like to take this opportunity to express again the warm appreciation of the Canadian Government to the countries and the institutions which participated in providing this support and to the Government of France, which helpfully prepaid half of its outstanding debt to Canada. The speedy and effective response, not only of the Fund as an institution but also of those of its members which participated, or offered to participate, was greatly appreciated. Here again was a clear demonstration of the willing- ness and ability of the international community to come quickly to the aid of a currency in difficulty. We are particularly grateful to the Managing Director for the understanding and helpful role which he played. Within the framework of the emergency program, the most important measure designed to bring about an immediate reduction in our heavy current account deficit, which was still running at an annual rate of $1 billion, was a graduated scale of temporary surcharges on certain classes of imports, affecting about one half of Canada's total imports. The items exempted were mainly raw materials, various industrial components, and certain foodstuffs, including fresh fruits and vegetables, citrus fruits, tea, and coffee.

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A second measure was the reduction in the customs exemptions allowed to Canadian tourists returning home from abroad. These two measures, together with the effects of other measures in the program, are expected to improve the current account by some $300 million on an annual basis. A third measure adopted was a reduction of government expendi- ture by $250 million in a full fiscal year. This, combined with estimated revenue of $200 million from the import surcharge, should reduce the budgetary deficit by some $450 million in a full year. When these measures were announced, the Government also made a number of important undertakings in connection with the emergency program. First, I quote Prime Minister Diefenbaker's statement: "The Government is determined to defend the foreign exchange value of the Canadian dollar as established last month at 92i cents U.S." Second, again quoting the Prime Minister: "It is the Government's intention to continue to maintain a climate in Canada hospitable to foreign investment and the Government will not be imposing any exchange controls." Third, while it was anticipated that the normal inflow of capital would revive, longer- term measures of a positive and constructive nature would be introduced to reduce the deficit in our current international accounts. At the same time as the announcement by the Government of its emergency program, the Bank of Canada announced that it was reverting to the system of a fixed bank rate and raised the rate to 6 per cent. I now wish to report to you on how our situation has progressed since this program was adopted. So far progress has been encour- aging. The primary task in June was to restore confidence. This was clearly achieved. Our exchange reserves, which had fallen to about $1,100 million on June 24, stood at $2,114 million at the end of July and $2,330 million at the end of August. The July and August figures, of course, include $650 million of borrowings from the International Monetary Fund, the Federal Reserve System, and the Bank of England. The line of credit of $400 million with the Export-Import Bank has not been drawn upon. Last Thursday

©International Monetary Fund. Not for Redistribution GOVERNOR FOR CANADA 51 my colleague, the Minister of Finance, announced that negotiations had been completed for a $250 million Government of Canada external bond issue in the United States and that an equivalent amount of the line of credit with the Export-Import Bank had been terminated at the request of the Government. While we are confident that our reserve position will continue to improve, it is not to be expected that the high rate of improve- ment experienced in July and August will continue. To the extent that the crisis was magnified by speculative positions, including "leads and lags," an early reversal of such positions was to have been expected, once confidence was restored; but subsequent increases in reserves may come more slowly. It is not yet clear whether and to what extent inward long-term capital movements have resumed, and insufficient time has yet elapsed for evidence of the developments in our underlying trade situation. Our reserves, net of borrowing, are still considerably below a desirable level. We cannot yet take the view that our balance of payments problem is solved, or that we can yet dispense with the emergency measures we adopted in June. However, I wish to emphasize that the import surcharges which were adopted as part of the emergency program are strictly temporary. Let me recall a statement I issued to the press on June 29: "The temporary application of these surcharges should not be interpreted as signifying any change whatsoever in the long-term commercial policy of the Canadian Government. The Government will continue to seek the reduction of trade barriers of all kinds, enlarged opportunities for Canadian exports, and the expansion of world trade on a multilateral and nondiscriminatory basis." We have given repeated assurances, not only to our own people but to the members of the International Monetary Fund and the CONTRACTING PARTIES to the GATT, that these surcharges will be removed just as soon as our balance of payments and our reserve position permit. Only last week, speaking to an audience in London, Prime Minister Diefenbaker said: "Someone has asked me whether the adoption of this policy means that it is a commercial policy meas- ure to assure additional protection. I want to point out here, here

©International Monetary Fund. Not for Redistribution 52 SUMMARY PROCEEDINGS, 1962 and now, that these are temporary financial measures adopted for an emergency directed to the improvement of our exchange reserves, and will be removed just on the very day that we see that they should be removed, and they will not be kept on any longer than is necessary." For the longer term, we know we must rely on positive and constructive measures designed to bring about a basic improvement in Canada's competitive position. We shall, of course, continue to need some capital imports, and we will ensure a climate hospitable to foreign investment in our country. But we must also aim at a continuing improvement in our current international account. Our new and stable rate of exchange will, of course, be a central element in any program to improve our current account. We believe it is already showing beneficial effects. We fully recognize, however, that we cannot rely on the exchange rate to achieve all that has to be done. In the consideration of other measures, we are as conscious now as we ever were of the special if not unique features of the Canadian economy: its geographical size and the burden of over- head costs borne by a relatively small population, the extent of its dependence upon resources of primary commodities, its close proximity to the world's greatest economic and financial power. The changing patterns of world trade have not all been to Canada's advantage in recent years and may not be so in the future. We are confident, however, that the key to the problem is to be found in improving the efficiency and competitiveness of the Canadian economy. We have been devoting increasing attention to this objective. We have undertaken special efforts to improve our productivity, including the creation of a National Productivity Council. We have provided special tax incentives to encourage investment and to promote research. We have adopted measures to facilitate better training and retraining of labor. We have set in motion a comprehensive study of our whole taxation system. I mention these steps as illustrations, rather than as a compre- hensive list, of the kind of measures which have been or will be adopted to achieve our longer-term objectives.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR KUWAIT 53 The Canadian Parliament will be assembling next week. During the Parliamentary session more will be said about all these matters. In the meantime, the Canadian Government has as a matter of urgency been making a thorough study of the whole spectrum of our current transactions in order to assess all possible courses of constructive action. Canada will continue to play its part as an outward-looking member of the international community. In trade policy, our objective now, as in the past, remains the expansion of trade on a multilateral nondiscriminatory basis. In finance and payments, we intend to continue fully to support the International Monetary Fund in its important and constructive work. Before concluding, I would like to express to Mr. Merle Cochran the deep appreciation of the Canadian Delegation for his many years of effective service to the Fund and wish him well in his retirement. In his place, as Deputy Managing Director, Canada welcomes another old and trusted friend in the person of Mr. Frank Southard. As he assumes his new duties he will have our good wishes and our warm support.

STATEMENT BY THE GOVERNOR FOR KUWAIT

Sheikh Jabir Al-Ahmad Al-Jabir

I wish, first, to express my Government's great appreciation of the overwhelming support it received in applying for membership of this and its sister organizations. We have always followed with great interest the work of these organizations and valued the role they have played and are playing in the vast, complicated, and challenging fields of economic stabilization and development. This is not just lip service; it is the expression of my country's earnest interest in the promotion of the prosperity and well-being of those who are less fortunate than ourselves. Kuwait is fully aware of the fortunate circumstances in which she finds herself. She enjoys a favorable balance of payments, a stable and strong currency, and a dynamic fiscal structure. But

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Kuwait is also aware of the responsibilities which her wealth has of necessity imposed on her, and she intends to take them seriously. Indeed, Kuwait's intention to do so has already been demon- strated in several ways. She has created a special Fund for the economic development of the other Arab states and has allocated for it some $140 million, which will be raised to over $400 million when necessary; she has allocated about $11 million in the current fiscal year as grants-in-aid of various welfare programs in the Gulf; and she has thrown wide open to all newcomers the doors of her free educational and medical services. Nor have Kuwait's contributions been confined to the Arab states, even though they have, and rightly so, a first claim on her. For my Government is happy to announce that it plans to send a delegation to several of the newly independent states in Africa with a view to introducing a special assistance program for these countries. Modest as our attempts may be, however, they hardly fail to indicate Kuwait's definite desire to devote part of her resources to the promotion of the welfare and prosperity of others. And Kuwait's admission to the Fund and the Bank and its sister organizations will afford my Government a new and valuable opportunity to widen the scope of our modest operations. As such, my country considers herself especially privileged to have been accorded this distinction. . . .

STATEMENT BY THE GOVERNOR FOR FRANCE

Jacques Brunei

For the first time I have the privilege of addressing this meeting, and I fully appreciate it. I shall try to contribute briefly to the discussion of the most interesting Annual Report of the Interna- tional Monetary Fund; and I congratulate Mr. Jacobsson, our distinguished Managing Director, for having maintained during another fiscal year, with the same clearness of judgment and firm- ness of decision, the basic principles of monetary order and soli-

©International Monetary Fund. Not for Redistribution GOVERNOR FOR FRANCE 55 darity that govern our institution. I also want to congratulate Mr. Southard for his promotion to the post of Deputy Managing Director. This fact mitigates somewhat our regret at the departure of Mr. Cochran, with whom we have had such friendly relations. The Report states that, as far as the volume of transactions is concerned, the past fiscal year has been a record one for the Fund. It rightly emphasizes that this activity has been all the more satis- factory as it did not develop in one direction only, since repurchases and reimbursements, as well as drawings themselves, have reached unprecedented figures. It also points out that, instead of being limited, as in a fairly recent period, to one or two major currencies, the Fund's transactions have brought into play a much greater number of them, especially those of continental Europe which, owing to their return to convertibility and their own strength, have come to be used in a more extensive way. Thus our institution has been able to play, better than at any time in its history, the role of a multilateral revolving fund which had been assigned to it by the Bretton Woods Agreement, and finds itself again, at the beginning of a new fiscal year, in a most favorable position to continue its activity for the benefit of international monetary order. If, instead of looking back to past transactions, we turn to the general studies made and to the decisions taken by the Fund during the same period, I think we have the same reasons to feel gratified at the considerable work that has been done in both fields. The credit must be given in a very large measure to the patience and energy of our friend Mr. Per Jacobsson. Through his efforts and those of the staff, our procedures have been clarified and made more flexible and, above all, the Fund has been endowed, for the future, with very substantial additional resources. The very exist- ence of these resources should be a matter of thinking for those speculators who are endeavoring—fortunately in vain—to forecast and even to engineer monetary collapse, while completely ignoring that a common will, coupled with ever more diversified and more effective demonstrations of cooperation, constitute a factor of permanent strength for the currencies of the Western world. Some of these decisions, which had the unquestionable merit of adapting themselves to changing circumstances in a convenient

©International Monetary Fund. Not for Redistribution 56 SUMMARY PROCEEDINGS, 1962 manner, could at the same time show a tendency to differ in some respects from the letter of the Articles of Agreement. The repre- sentatives of France—a country of civil law—sometimes felt they had to draw attention to this fact, certainly not to express qualifica- tions, but to sound a warning for caution. We generally believe, however, and I confirm it willingly, that these clarifications were wise and fair in such matters as the conditions under which the Fund's resources may be used to help a country which suffers from adverse capital movements, the principles which shall govern the choice of the currencies to be drawn or reimbursed, or the granting of appropriate facilities for specified conversions, with some qualifications, however, as far as the rates to be applied are concerned. These clarifications of the Fund's thinking and practices are a useful factor of confidence and safety for the future. As far as the basic problems are concerned, we are glad to note that the Fund takes the opportunity of the publication of its Annual Report to recall some fundamental principles which we fully approve, such as the virtues of policies of financial stability, even for member countries that are mainly concerned with development, and the repudiation of the system of fluctuating exchange rates, which, seldom benefiting the country that adopts it, can hardly be recon- ciled with the concepts of international monetary discipline. The borrowing arrangement, often designated, to our satisfaction, by the term "Paris Agreement," is by far the most important among the general decisions of the past months. We have been glad to cooperate with its conclusions, to contribute to it for a substantial amount, and to ratify it rapidly. We hope the pending ratifications of this agreement will not be delayed too long, so that its provisions can be formally and readily applicable in case of need. The inter- changes of views that have taken place on the occasion of this meeting show that the former spirit of cooperation of the partici- pating countries is still present nowadays, and this is highly gratify- ing. If no serious crisis seems to threaten the international monetary order for the time being, we would show too much shortsightedness and complacency if we were led to believe that all the problems had been solved. The Report we are discussing clearly shows that

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balance of payments disequilibria are still a major source of worry, and carefully suggests a number of actions by the creditor as well as by the debtor member countries, in an effort to mitigate the imbalance. France is finding herself among the countries of the first category, and the Report classifies her as being in the honorable—but not necessarily enviable—position of the main surplus country in the world for the past year. Therefore, I can neither be surprised nor painfully impressed by its particularly detailed comments upon the policies we are following. Perhaps we may think that it does us too much honor, and we are inclined to fear those praises that may easily turn into criticisms, even if we find in them, not without some satisfaction, the counterpart of the opposite judgments we deserved and accepted a few years ago. Having returned in the recent past to our traditional position of a creditor country, we are conscious of the responsibilities of this position, and are trying to fulfill them. More precisely, we believe that, during the period under review, France has been following policies which were consistent with the general interest as well as with her most legitimate national ones, and that one may reason- ably expect she will continue to follow them. In the internal field, we have refrained from deflationary policies and from attracting international capital by making money too scarce or too expensive. The new methods of monetary control which have been introduced recently and which may be compared, in many respects, with the classical systems of reserves, did not do too much to help absorb internal liquidity. On the contrary, perhaps we must ask ourselves whether we have been rigorous enough in that respect. In the field of international financial relations, the existing restrictions have been considerably eased, so that there is now a de facto convertibility for capital transactions, while there exists a system of practically unrestricted freedom in the case of tourism. On the import side, the progressive easing of restrictions resulting from our obligations under the Rome Treaty has been followed by

©International Monetary Fund. Not for Redistribution 58 SUMMARY PROCEEDINGS, 1962 many other decisions entailing an opening of our frontiers to practically all the countries of the rest of the world. In such circumstances, our balance of payments surpluses have been basically genuine ones, representing as they did legitimate earnings which, while originating in no negligible measure from capital repatriations and long-term foreign investments, actually reflected above all our trading and other current account surpluses in a climate of ever-extended freedom. We have endeavored to make an appropriate use of these surpluses, taking into account our own capacities and needs as well as the unquestionable necessities of international monetary order. I do not want to draw a particular pride from such a remark, but rather to emphasize that our policies have been and remain consistent with the princi- ples of solidarity which are naturally defended within our institu- tion. Since the end of the war, these policies have materialized in the form of permanent contributions toward aid to developing nations, the importance of which is known to everybody when compared with our national income and the contributions of other countries. In accordance with the same spirit of solidarity, coupled with a deep gratitude for the most generous aid received in the past, these policies have been reflected, during the year under review, in a systematic reimbursement of our long-term foreign debt. Thus, in the past six months, our advance repayments, either in the form of repurchases of annual installments from the IBRD or in the form of genuine reimbursements in favor of friendly countries, totaled $475 million, to which must be added a sum of $55 million, representing ordinary contractual maturities. Our foreign debt, which amounted to $3,269 million during the worst years of our postwar monetary history, have thus been reduced to $1,178.6 million on August 31, 1962. At the same time, the Fund has been able to make an extensive use of its French franc holdings up to 49 per cent of our quota; the outstanding French franc drawings amount to the equivalent of $241.6 million at the present time. Should we go much faster and further in our present efforts, which are consistent, in our opinion, with the general suggestions

©International Monetary Fund. Not for Redistribution GOVERNOR FOR FRANCE 59 of Mr. Jacobsson's Report, in order to help the restoration of international equilibrium? This is a problem one may rightly put before us and which is already apparent in the suggestions and remarks that are sometimes made about the structure of the finan- cial markets of Europe and their current rates of interest. Of course, we are fully aware that a more pronounced downward drift of long-term rates would be desirable, not only to encourage French investments abroad or to prevent residents from borrowing in foreign centers, but also to facilitate our own investments within the country. Indeed, we never lose sight of this necessity and are constantly trying to find the means of bringing the rates down. But who would deny that, in this particular field, sustained patience is the price to be paid for getting the desired results in a country which scarcely has emerged from inflation and must fulfill simul- taneously a number of equally urgent tasks that absorb the whole of its available savings? However, let me emphasize once more that our own interests do coincide with those of countries where cheap money is attracting borrowers, and we hope that reciprocal adjustments will lead to a state of equilibrium satisfactory for all, while definitely rejecting methods of control and restraint that are as dangerous as they are ineffective. The aim of my analysis of French monetary policy during the past year is to underline the principles that govern it. Creditor countries have their own obligations and responsibilities, which should not be disregarded any more than those of debtor countries whose situations require more urgent attention from the Fund. The monetary structure of the Western world unquestionably rests upon a certain hierarchy of currencies, which is a source of privileges but also a source of responsibilities for some of them. But this structure is increasingly resting upon a set of solidarity rules, and solidarity is a reciprocal virtue. That is why the disci- plines which are to be observed, if order is to be maintained in international monetary management, should apply equally to all concerned. That is why one records with great satisfaction the advances made in the field of free and equal cooperation, and the progressive abandonment of attempts to maintain "established policies" within

©International Monetary Fund. Not for Redistribution 60 SUMMARY PROCEEDINGS, 1962 an unduly restricted national framework (to use the words of the Annual Report). Undoubtedly, much remains to be done in this respect. New techniques have been developed of late in the form of bilateral arrangements, coordinated action on the forward exchanges, and agreements tending to limit the fluctuations of the gold market. Unquestionably, such arrangements have the interest of an experi- ment, and they prove useful in practice for the day-to-day regulation of markets. But they can be expected to bring only a relatively limited contribution toward solving the fundamental problem: the problem of strengthening the international monetary system on a permanent basis. Such a task must be performed more than ever in the different places where we have the pleasure to meet frequently—IMF, OECD, EEC, BIS—and my country is prepared as before to bring a substantial contribution to this objective. However, if we want to show realism and efficiency, we must accept the fact that one of the means of inducing a country to make the most extensive effort is to persuade it that every one of its partners is brought under the same discipline and to give a firm assurance that its vital interests are understood and respected. Such has been, in fact, the spirit that governed the happy con- clusion of the borrowing arrangement between the ten leading industrial nations. And this, too, is the spirit which ought to inspire new studies, always possible and always useful in the ever- changing field of international monetary settlements. If such studies are to be undertaken in a coordinated way, no doubt advantage would be taken of the experience acquired by those international monetary organizations which have contributed to the restoration of the monetary order and are still instrumental in maintaining it by resorting to methods of free and confident cooperation. Finally, similar principles would have to be applied should new agreements of a more or less monetary character be necessary in order to help the raw material producing countries. Every country should try to adjust the amount of assistance given to its current capacity, and such aid as would be granted should not be automatic,

©International Monetary Fund. Not for Redistribution GOVERNOR FOR UNITED KINGDOM 61 in order to prevent new bursts of inflation. As the French repre- sentatives have emphasized many times in the past, we are favoring more specific and, in our opinion, more practical methods which tend to organize the markets, product by product, combining to this end a reasonable limitation of production with the assurance of outlets at stable prices. We are far from thinking that such a problem, which has received only partial solutions up to now, is not a vital one for enormous populations. We are so much aware of its seriousness that we have been endeavoring for many years to grant the benefits of this stability to the overseas territories that are keeping particularly close relations with us, within this most lively entity which the French franc zone still represents, in spite of many political vicissitudes. The representatives of the different countries of this zone are with us today, some because they have been members of the Fund for several years, some—Senegal, Togo—because they have just been admitted, some because they have got the assurance that their applications will be accepted in the near future. I hope you will allow me to extend to them all my warmest greetings and to tell them how glad we are to see them participate in our present work.

STATEMENT BY THE GOVERNOR FOR THE UNITED KINGDOM

Reginald Maudling

Last year's Annual Meeting in Vienna took place only a few weeks after the Fund had completed its largest individual trans- action, namely, the United Kingdom's drawing of the equivalent of $1.5 billion and the stand-by arrangement which gave us the right to draw the equivalent of a further $500 million. A few weeks before this year's meeting we completed the repurchase of our drawing. Thus, the largest drawing in the history of the Fund was repaid in full within 12 months. The successful recovery of sterling during

©International Monetary Fund. Not for Redistribution 62 SUMMARY PROCEEDINGS, 1962 that period has been a remarkable justification of the policies of the Fund—and I hope I may say, as I was not Chancellor of the Exchequer at the time—of the policies of the United Kingdom and my predecessor, Mr. Selwyn Lloyd. I hope that all who were concerned with the difficult problems of policy and technique which the drawing involved have been encouraged by these developments. I would pay particular tribute to the Managing Director, for whose wisdom and foresight the United Kingdom has once again had cause to be grateful. And may I take this opportunity of referring briefly to Mr. Cochran and Mr. Southard. We take leave of the one with regret and extend a warm welcome to the other. Both are old friends of us all. At the same time that we completed our repurchase, an appli- cation was made—and approved—for the renewal of the stand-by arrangement in the amount of $1 billion. The reasons why we asked for this insurance facility are well known, but this is a further indication of the valuable services which the Fund stands available to perform, both for reserve currencies and others. May I turn now to the Annual Report of the Executive Directors. It rightly emphasizes what a record year this has been for the Fund in every phase of its operations. Not only did total sales of currency, and the amount of stand-by arrangements made, far exceed the comparable figures for any financial year in the Fund's history, but repurchases by members were substantially above any previous year's figures. Moreover, a commendable development in the Fund's policies has led to the use of a wider range of members' currencies, not only in drawings but also in repurchases. There has indeed been a remarkable change from the practice in the earlier years of the Fund's operations, when drawings and repur- chases were overwhelmingly made in United States dollars. The new policy of diversifying drawings and repurchases, based as it is on a process of consultation with the Managing Director and his staff, takes account of the welcome fact that an increasing number of currencies can now be regarded as usable for the transactions of the Fund. I am particularly glad to read the references in the Report to the problems of the primary producers, and to note that the Fund

©International Monetary Fund. Not for Redistribution GOVERNOR FOR UNITED KINGDOM 63 is already doing a great deal—and on an increasing scale—to help them with their short-term balance of payments difficulties. In the 12 months covered by the Annual Report, Fund transactions with such countries were bigger than ever before. Twenty-one of them drew $743 million and at the end of the period outstanding drawings by primary producing countries were about $1.3 billion as compared to around $i billion ten years earlier. But of course short-term credits, whether from the Fund or some other source, cannot provide a full answer to the problems of countries which face the prospect of a continuing decline in the earnings from their main exports. The Annual Report is right to emphasize the serious problems created for the world by the relatively unsatisfactory development of their export earnings. I welcome the prospect of new international agreements for coffee and cocoa, designed to prevent major falls in prices while tackling the underlying problems of imbalance between supply and demand; and also the attention which is being given in the GATT to the possibilities of improving the outlets for the trade of developing countries. In this connection, I welcome also the fact that the Fund is associated with the current United Nations study of the problems arising from fluctuations in receipts from exports of primary products. The development aid provided from so many sources is vital. But much development may be sterile, and much aid wasted, if growing industrialization is not permitted to lead to growing export earnings, as our Chairman pointed out so forcefully in his opening address. Aid without trade, as has so often been said in the past, is not enough. We are told with authority that it is more blessed to give than to receive: it certainly appears in many cases to be easier. We in the industrialized countries must be ready to do both. This leads me to the wider problems that face us in the field of trade and payments as a whole. First, I would stress that in my view the immediate situation is more encouraging than might have been expected a year ago. Most major trading countries are much nearer to balance. And the last year has seen such encouraging

©International Monetary Fund. Not for Redistribution 64 SUMMARY PROCEEDINGS, 1962 developments as the borrowing scheme, the entry of the United States into the foreign exchange markets, and the growing coopera- tion on financial and monetary matters in OECD and between central banks. As for the immediate situation, attention is still being focused on the deficit in the United States balance of payments. The nature of this deficit is a very special one. On current commercial trans- actions the United States has a massive surplus, and the problem has arisen because of the enormous amounts spent abroad on aid, defense, and investment. It could be said that the problem is less one of a balance of payments than of a balance of generosity. The success of the United States in reducing their over-all deficit this year is not always fully appreciated—a success which of course owes much to the substantial assistance they have received in the form of advance repayments of debts by other member countries. As a result of these developments, the requirements of the United States to finance its prospective deficits are well within the capacity of the present system of finance, especially when the arrangements we have made over the past year are taken into account. This is a fact in which all of us who wish to see a stable international monetary system can rejoice. The Fund borrowing scheme will ensure an impressive enlarge- ment of the resources available to the Fund in case of need and will notably spread the burden which previously rested too exclu- sively on the broad shoulders of the United States. At a time when the Fund's operations were in danger of being impeded by a shortage of other strong currencies, the borrowing scheme comes as a means of providing the Fund with additional amounts of those currencies in a way which will take full account of the economic strength of the countries concerned at the time of the operation. Moreover, the United States authorities have been implementing their decision to intervene directly in the foreign exchange markets, like others among us, to smooth and control movements in the exchange rate. I attach great importance to this decision. In the years of rebuilding the international payments system after the war, the United States dollar performed the great and essential service of providing a fixed basis of value. But so long as the United

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States authorities stood aloof from the foreign exchange market and left the relationship between the dollar and the other currencies of the world to be settled, ultimately, by gold purchases and sales, the monetary relationship between America and her neighbors remained subject in some measure to the limitations of the former gold system. The mere fact of intervention by the American authorities will not in itself produce—and I am sure it is not expected to produce—a dramatic development of the international monetary system; but it opens the door to the introduction of further useful advances which merit careful study. Both this United States decision and the Fund borrowing scheme are in the direct line of development which the international payments system as a whole has been following since the war and which the Fund itself was designed to promote. That is to say, each has represented an advance in the integration of the existing national currencies into a stronger and a more smoothly functioning international payments system, and moreover a system which is more genuinely international in the sense that responsibilities and advantages are more evenly shared between nations. These develop- ments demonstrate that the Fund and its members are ready to adapt their thought and action to cope with the developing world situation. They are, to quote the Managing Director, "building, and continuing to build in the Western world, a monetary system capable of meeting in the world the needs of our time." Much, therefore, has been accomplished and the position of the reserve currencies and of the payments system that rests upon them is one of great strength. But we cannot be content to rest forever at this point. The Managing Director, in the quotation I have given, talked of "continuing to build." The "needs of our time" are changing fast as our whole world is changing. The success we have achieved—and the strength of the current position—is a basis for further advance in the future. I believe it is universally accepted that a growing volume of world trade calls in the long run for a growing volume of liquidity, even if not necessarily in arithmetic proportion. Of course there is scope for arguing at any given time whether total liquidity is

©International Monetary Fund. Not for Redistribution 66 SUMMARY PROCEEDINGS, 1962 adequate, or whether there is enough liquidity but unevenly distributed, or whether the liquid resources available are not themselves liquid enough. I am not concerned now with the immediate position to which I have just referred, but with the contribution that the international payments system should make in the future to the growth of world trade and production. There are those who argue for a return to the classical gold standard. I find it difficult to accept this proposition. Either it means that the volume of world trade must be tied to the amount of gold that can be mined and acquired by monetary authorities, which seems to me a proposition that is not intellectually sustain- able; or the volume of gold available must be brought in line with world reserve requirements by variations in the price of gold, and the difficulties of this course are only too clear to all of us. To quote the Managing Director's Jayne Lectures for 1961, "It is certain that gold output alone cannot be relied upon to bring about the necessary increase in the world's money supply." At present, gold is supplemented by the two reserve currencies— the dollar and the pound sterling. But there is a fundamental difficulty about this system, namely, that the reserve currencies are short-term liabilities of the United States and the United Kingdom—one nation's reserves is another nation's debt. The rate of growth of these liabilities cannot be a matter of indifference. The process of accumulating debts can be agreeable—as we all know—especially if in the course of it we can provide a service to our friends. But the fact of having accumulated them can create inhibitions, especially if a large proportion is repayable on demand. Requests for payment may arise at times and in volumes that are determined by factors wholly outside the control of the debtor, but nevertheless that have to be promptly met. If the amounts of such currencies held as reserve assets increase too much there will inevitably be some doubt as to whether any further extension of these holdings would be prudent and practicable. The expansion of the system at any one time is therefore subject to limitations and this may inhibit the growth of world trade and production. The gold exchange system has already undergone extensive development in the last seventeen years, particularly in the much

©International Monetary Fund. Not for Redistribution GOVERNOR FOR UNITED KINGDOM 67 wider use of the dollar. But despite the many advantages of the system as we know it today, I cannot believe that its evolution can stop here, or that we already have the final answer to the longer- term problems. We shall have to be prepared to supplement present international payments arrangements if we are to make certain that they do not act as a brake upon the possible expansion of world trade and production. Indeed, the last year has already seen the scope of the system increased by valuable new ideas which must be capable of further development. The borrowing scheme, for instance, is a highly practicable arrangement for dealing with a serious threat to the international monetary system. It will enable temporarily weak currencies to be absorbed into the Fund while making available an equivalent amount of stronger currencies. But the resources made available under the borrowing scheme are not part of the normal stock of liquidity, and it is deliberately designed to be used only in exceptional and extreme circumstances. Another valuable idea recently put forward, namely, the mutual holding of currencies, could constitute a more readily usable method of increasing the part which currencies play. But can we hope under present conditions that this would always be carried far enough, having regard to the normal inhibitions about large holdings of currencies which are temporarily surplus in the markets? Unless, therefore, we can supplement them, these two ideas will have their limitations. Is it not possible for the Fund, building on these ideas, to provide the basis of a multilateral system of a more regular and automatic character which would be capable of expansion to the extent necessary at any time? Some people have seen, for instance, in the obligations created under the borrowing scheme the germ of a truly international paper which might in due time become acceptable and transferable between the monetary authorities and so become a familiar holding among reserve assets. It would certainly be worthwhile to explore this possibility. I am myself, moreover, attracted by the thought that we might develop a system of cooperation between the leading trading countries in the form of a mutual currency account in the Fund. By this, I have in mind an arrangement of a multilateral character under which countries could continue to acquire the

©International Monetary Fund. Not for Redistribution 68 SUMMARY PROCEEDINGS, 1962 currency of another country which was temporarily surplus in the markets and use it to establish claims on a mutual currency account which they could themselves use when their situations were reversed. Such claims on the account would attract the guarantee that attaches to holdings in the Fund. We would hope that such a system would enable world liquidity to be expanded without additional strains on the reserve currencies or avoidable setbacks to their economic growth, and at the same time without requiring countries whose currencies were temporarily strong to accumulate larger holdings of weaker currencies than they would find tolerable. I am not at this stage putting forward any cut and dried plan. These are not problems that can be solved by slogans or gimmicks. What I have been trying to do is to follow the logic of the argument, and I hope that these ideas that I have mentioned, and indeed any other ideas designed to solve the same real problem, will be actively studied. As the Managing Director said on Monday, "the possi- bilities of further action are certainly not exhausted." Nor, I hope, is the collective ingenuity of the world's leading financial authorities. To sum up: Great progress has been made in the past year. The international payments system has been strengthened, as have the positions of individual countries. The financial foundations of the gold exchange system are solid. But our tasks are not completed. The growing and changing world urges us to continue our advance. Our objective must be to facilitate the maximum expansion of world trade and avoid unnecessary obstacles to economic growth in the world as a whole or in individual countries. I am sure it can be attained.

STATEMENT BY THE GOVERNOR FOR THE FEDERAL REPUBLIC OF GERMANY

Karl Blessing

I think there is once again every reason to express our appreciation of the fine work which has been accomplished in the past year by the Fund and its Managing Director. I should also like to extend to my old friend, Mr. Merle Cochran, our gratefulness for the excellent services he has rendered to the Fund for so many

©International Monetary Fund. Not for Redistribution GOVERNOR FOR GERMANY 69 years. To his successor, Mr. Southard, who has established such a fine reputation in his present capacity, I wish the very best in his important new job. When we met last year in Vienna, we had cause to be worried about the tensions in the international payments situation, and especially about the pressure upon the two key currencies. In the meantime, good progress has been made toward better balance in the position of both currencies, sterling and dollar. I am impressed by the increasing strength of the pound sterling, reflected in the speedy repayment of the British IMF drawing well in advance of its maturity, and I am equally impressed by the firm determination of the U.S. authorities to reduce the still remaining balance of payments deficit and to achieve equilibrium in the near future. As a correlate to this improvement in the field of the key currencies, some long-standing surplus positions with continental European countries have disappeared or are about to disappear. As regards my own country, it has experienced an unbroken basic surplus for nearly ten years. Last year when we met in Vienna, there was already some evidence of a change in our balance of payments situation. This has, in the meantime, been confirmed by the actual development. Our surplus on current account has disappeared and has indeed been replaced by a small deficit. This reversal has benefited the international payments situation and has contributed to an expansion of world trade. In the first seven months of 1962 our imports have increased by about 13 per cent against an increase of only 3.6 per cent in our exports. Similarly, our imports of services and other invisibles have in the last two years increased by leaps and bounds. All available figures indicate that this development will continue. From the beginning of 1961 up to August 1962, official currency reserves of the German central bank have indeed decreased by no less than about $800 million (not counting the book loss due to the revaluation of the deutsche mark). Thus, we have fed back that amount of liquidity into the international system. This fundamental change in our external position was partly brought about by the revaluation of the deutsche mark in March

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1961, partly by an increase in our internal price and cost level. In spite of the revaluation, which has brought our costs and prices more in line with the international level, our prices and costs have risen considerably, and wage costs have by far outpaced increases in productivity. The fact that the wage-price spiral in our country has been so difficult to contain is in part due to the after effects of the long-standing surplus in our external position, because this surplus had led to high internal liquidity and excessive domestic demand. This, of course, has been a very painful way of contributing toward international equilibrium, a way which induced considerable domestic opposition since it endangered our internal stability. Fortunately, foreign competition on the home market as well as abroad is now beginning to put a brake on the upward movement of our cost and price level. We very much hope that this adjustment process, with its damaging effect on the internal value of money, has now come definitely to an end, and that we shall be spared any repetition of it. From this experience, which incidentally is not limited to my country, we should draw some more general conclusions as to the working of the international monetary system. As both frequent adaptations of exchange rates and flexible rates have to be ruled out as being inconsistent with the Fund's principles and detrimental to international trade, there is no other way but to adjust demand and cost levels as between surplus and deficit countries. Such adjustments cannot, however, be imposed on surplus countries only. It is necessary that—just as under the gold standard—the burden of adjustment has to be shared by both sides. Deficit coun- tries must also contribute by keeping their cost level stable, or even reducing it, for instance, by keeping their wage increases short of increases in productivity. Otherwise, surplus countries would be chasing after a will-o'-the-wisp, and for all efforts to remove their surpluses in the interest of the international system they would be punished by being compelled to import creeping inflation over and over again. This underlines the great responsibility that rests upon the United States. I think it is no exaggeration to say that not only

©International Monetary Fund. Not for Redistribution GOVERNOR FOR GERMANY 71 a satisfactory solution for the U.S. balance of payments problem but also the good functioning of our whole international monetary order depends upon the maintenance of cost and price stability in the United States. The United States as the leading economic and financial power in the world must become the stabilizing center and pivot around which all our economies can safely revolve, and it is gratifying to note that the United States has made encouraging progress in stabilizing its cost and price level over the past few years. It has also given me great satisfaction to learn, from the statement of the U.S. Governor, how much this responsibility is recognized by our great host country for the future as well. We have been witnessing, over the last few years, a lively dis- cussion on the merits and demerits of our international monetary system. To my mind this discussion has too often been sidetracked by the tendency to look for an institutional panacea where only sound policies of the member countries can provide the answer. If there is monetary disorder within the leading countries, no conceivable international monetary system can function satisfac- torily. Where there is a structural basic deficit in the balance of payments, the causes of this basic deficiency must be tackled and removed, and no institutional gadgets can relieve us of that task, however painful it may be. If one looks at the present international economic situation, it is hard to believe that a shortage of international liquidity and the danger of world-wide deflation are imminent. I am not of the opinion that the disappearance of inflation or a lesser degree of inflation amounts to deflation. Of course, international liquidity should be sufficient to provide adequate time to remove imbalances, but it should also be scarce enough to enforce monetary discipline. Any proposal for reform should therefore be examined from the outset, whether it leads to a strengthening or a weakening of the incentives for monetary discipline and balance of payments equilibrium. On the other hand, there is something to be said for making available enough international liquidity for help in cases of justified need, and on the basis of approved adjustment programs. It has

©International Monetary Fund. Not for Redistribution 72 SUMMARY PROCEEDINGS, 1962 always been my opinion that the general arrangements to bor- row within the IMF fit very well into this line of reasoning; and the German central bank has not hesitated to participate in these arrangements, by making available the very large amount of DM 4 billion (equivalent to $1 billion) on a stand-by basis. The IMF has proved to be the appropriate instrument for dealing with problems of international liquidity efficiently and flexibly. These qualities the Fund has recently demonstrated in the British and in the Canadian case. We would do well to encourage the Fund to continue its useful work on the basis of the principles evolved over the past ten years, which have stood the test of time.

Aside from the general borrowing arrangements within the Fund, there have been some other arrangements between a number of central banks that should also contribute to strengthening our international monetary order against disturbances. These swap arrangements between central banks have often been misinterpreted by the press and by the public at large. They have sometimes been criticized as a "mere patching up" of difficulties where measures of a fundamental character were needed. I think that in the minds of those responsible for such bilateral arrangements there was never any thought of regarding them as a cure for basic disequilibria in the balance of payments. They have always been conceived as providing only temporary assistance against short- term disturbances of a speculative nature. Within that narrower and limited technical sphere, they have proved their usefulness, and I have no doubt that they will continue to do so.

On the other hand, this network of currency arrangements is a part of that wider field of international monetary cooperation which has become closer and closer during the last few years, comprising not only temporary mutual assistance in the foreign exchange field but also a common attitude toward gold markets and a continuous coordination of national monetary and financial policies. This evolution, which has grown out of experience on a trial and error basis, is something quite novel, compared with prewar times, and is about to transform the whole climate of international monetary policy.

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Our Managing Director, Mr. Per Jacobsson, pointed out at the last Annual Meeting that the circumstances under which the present gold exchange standard is operating are quite different from those of the gold exchange standard in the twenties. Nobody would deny that the present system involves some risks, but in view of the monetary cooperation prevailing today, and with the assistance of the new multilateral and bilateral currency arrangements, I think we shall be able to live with these risks. It is certainly a noteworthy development that the United States has itself begun to keep part of its reserves in the form of foreign exchange. This new feature may prove to be of particular impor- tance in the case of a reversal of the U.S. balance of payments toward a renewed surplus position; for it may then help to banish the specter, sometimes conjured up by imaginative economists, of a general liquidity squeeze arising out of U.S. surpluses. It may well be that in the future we may have to develop the gold exchange standard also in other respects. If we share a common responsi- bility for its good functioning—as I am convinced we do—we may perhaps have to consider how best to arrive at some common principles as to the sharing of its burdens, including a common attitude toward the composition of currency reserves. I believe that our international monetary system, strengthened as it has been by the various innovations, is well equipped to deal with the prob- lems which may face us. And if, in a more distant future, new solutions should be required, I am convinced that we shall find the answers in due course.

STATEMENT BY THE GOVERNOR FOR THE SUDAN Abdel Magid Ahmed

Once more, it is my privilege to express in the name of the Government of the Republic of the Sudan and its people satisfaction at the great progress achieved during the preceding year by the International Monetary Fund, the International Bank for Recon- struction and Development and its affiliates, IFC and IDA. To the management and members of the staffs of these institutions go our warmest congratulations. . . .

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We in the Sudan, like many other developing countries, are engaged in a relentless struggle to improve the economic and social conditions of our people. Thanks largely to the existence of these institutions, we have never felt alone in this struggle. We have always found them a source of wise support and solid strength. But development is a continuing process. The Sudan has recently launched a Ten Year Development Plan. It may be interesting to note that in formulating our Plan we have been very much preoccupied with many of the problems raised by the speakers at this Annual Meeting. First and foremost looms the problem of the unfavorable move- ment of the terms of trade of the bulk of the primary producing countries, like ourselves. While the prices of the imports of these countries have generally risen in recent years, the value of their exports have, in most cases, recorded a definite downward move- ment. This problem clearly calls for some comprehensive and concerted international action. In this connection, it may be mentioned that if the emergence of economic regional groupings were to result in restrictive trade policies, the problem of the exports of the primary products will be even more seriously aggravated. Secondly, the substantial inflow of "soft" loans to developing countries represents their greatest need and hope for development especially at a time when there is general recognition of the importance of greater emphasis on educational, social, and infra- structural investments. Thirdly, the multilateral approach to aid through the IBRD, or with the help of consortia, is proving to be the most effective way of ensuring coordination and obtaining the maximum benefits from the scarce resources available for aid. . . . In the course of the last two years, much attention was given to the problem of international liquidity. It became apparent that international liquidity depends to a great extent on the willingness of the monetary authorities of many countries to hold, in addition to or instead of gold, reserves in the form of the two key world currencies, i.e., U.S. dollars and pounds sterling. The grave

©International Monetary Fund. Not for Redistribution GOVERNOR FOR SUDAN 75 dangers to international liquidity arising from sudden switches by monetary authorities from one key currency to another, or from either or both of them to gold, have also now become obvious. In this connection, it may be interesting to see how the problem of the medium in which foreign exchange reserves should be kept appears from the point of view of a developing country like the Sudan. The Sudan has no formal ties with any monetary area and has full freedom to decide its policy in respect of its foreign exchange reserves. Recently, we have undertaken in the Sudan the task of reassessing our policy of investment of the country's foreign exchange holdings. Our investment policies are now guided by the following considerations: the medium in which our reserves are kept should be generally acceptable for effecting international payments and, if possible, should be that in which the country normally transacts the bulk of its foreign exchange business or, alternatively, easily convertible into such medium at no or little cost; further, the chosen medium should assure the stability of the value of the reserves in terms of other currencies; it should also, if possible, permit the realization of interest on the reserves. The latter consideration, though not decisive, is of some importance in the case of the Sudan. Because of the fluctuations in the value of its exports the Sudan has to keep relatively large reserves, the earnings from which constitute an important element in the coun- try's national income and foreign exchange receipts. We have decided that our purposes can best be served by keeping our foreign exchange reserves in the form of the key currencies rather than in the form of gold. This policy ensures keeping the reserves in the medium in which most of the foreign exchange earnings are actually received; it minimizes the cost of effecting payments anywhere in the world, and permits of profitable investment even on short term. The only possible disadvantage is the risk that the key currency or currencies in which we keep our reserves could undergo depreciation vis-a-vis currencies of other countries from which part of our requirements of goods and services is being obtained. The Sudan has, therefore, followed with great interest inter- national measures taken in the course" of last year to strengthen

©International Monetary Fund. Not for Redistribution 76 SUMMARY PROCEEDINGS, 1962 the existing international monetary system and diminish the risk of devaluation of the key currencies. We have welcomed the strengthening of the resources at the disposal of the IMF, and also the measures of increased direct cooperation between the monetary authorities of the main industrial countries of the world. We believe, however, that the system could be still more strengthened if countries keeping their foreign exchange reserves in the key cur- rencies could be given an exchange guarantee. We have observed that some form of exchange guarantee appeared in the mutual agreements between the main industrial countries. We are of the opinion that the risk of sudden switches from foreign exchange holdings into gold or from one foreign currency into another would be greatly diminished if foreign exchange holdings in the possession of all the monetary authorities, especially those of the developing countries, were given a similar exchange guarantee. . . .

STATEMENT BY THE GOVERNOR FOR JAPAN

Kakuei Tanaka

I should like, first of all, to convey my deep appreciation to Mr. Jacobsson for his excellent and stimulating address. Since the last meeting we have welcomed a number of new members to the Fund. Many more countries are now taking steps to join. It is encouraging to note this clear indication of the progress of international cooperation achieved in the monetary field centered about the Fund. On this occasion, I also wish to express to Mr. Cochran, who is leaving the Fund next month, my gratitude for his distinguished services over the past years, and also to welcome the appointment of Mr. Southard to be the new Deputy Managing Director. Many developments in Fund activities have taken place in the past year. In line with growing activity in international movements of funds, the availability of Fund resources to finance capital transactions has been clarified. Much has also been accomplished to diversify the currencies used in drawings and in repurchases.

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Mr. Jacobsson's proposal at the last meeting, at Vienna, to replenish the Fund's resources by borrowing has materialized in a borrowing arrangement with the support and cooperation of the participating countries. We are deeply indebted to Mr. Jacobsson and his staff for this achievement. In the belief that this arrange- ment will be of great help in strengthening the international mone- tary system, we have already notified our adherence to it. We trust that all the participating countries will complete their pro- cedures for adherence in the near future. It is also reassuring to note that efforts are being made to obtain more flexibility and to adapt Fund activities to the changing situa- tion of the world economy. I expect that the Fund will continue these efforts and will extend timely and appropriate assistance to member countries in overcoming their balance of payments difficulties. Because of the very rapid growth of our economy, considerable difficulties in our balance of payments were experienced in the past year. The drastic monetary and fiscal measures taken by our Government since last summer have been effective in gradually calming down and restoring stability to the economy. Our balance of payments position has recently shown steady improvement. The support which the Fund gave us by approving a stand-by arrangement was, I think, conducive to this success. I should like to assure you that we intend to watch carefully future developments and to adhere to the principles of sound fiscal and monetary policies in order that a balance in our international payments will be maintained in the future. Finally, I wish to say a few words regarding liberalization of our trade and payments. In spite of the considerable difficulties in our balance of payments to which I have referred, we have been and are making sincere efforts to carry on our import liberalization program according to schedule. We expect the ratio of liberaliza- tion to reach approximately 90 per cent by October. We also face many domestic problems, in the field of medium- and small-scale enterprises, agriculture, and others. In such a situation the balancing of our international payments at the same

©International Monetary Fund. Not for Redistribution 78 SUMMARY PROCEEDINGS, 1962 time as we are going ahead with rapid liberalization of our trade is not easy. Expansion of our trade is therefore of vital importance to us. Free trade in a free market is our common objective. In this respect, it is very regrettable to note that there remain a number of Fund members who still discriminate against our exports, although some improvement has taken place in reducing their discriminatory practices. Japan is already one of the world's largest markets for the exports of other countries. She can become an even larger market if mutually beneficial trade policies are followed by other countries. It is our sincere hope that the member countries will appreciate our efforts and will remove all remaining discrimina- tion at the earliest opportunity.

STATEMENT BY THE GOVERNOR FOR AUSTRALIA

Harold Holt

Once again we are indebted to Mr. Per Jacobsson for another masterly survey of the world monetary scene. Each year we sit respectfully at the feet of this benign economic philosopher and depart wiser, we hope, but certainly better informed. We con- gratulate you also, Mr. Chairman, for the splendid introduction you gave in the speech with which you introduced our discussions. You are a veteran of these gatherings and we are all able to profit by the knowledge and insight displayed in your presentation. I should like to join in those well-merited tributes that have been made by others to Mr. Cochran on his retirement as Deputy Managing Director of the Fund. He takes with him our warm regards and best wishes. May I also express my pleasure at the appointment of Mr. Southard as his successor. The great distinction with which he has carried out his duties as Executive Director for the United States will have satisfied all of us that an excellent choice has been made. I welcome the recognition given in the speeches, both of you, Mr. Chairman, and of the Managing Director, Mr. Jacobsson, to

©International Monetary Fund. Not for Redistribution GOVERNOR FOR AUSTRALIA 79 the problems created by unfavorable terms of trade for the primary producing countries. These countries have, over their history, been subject to more violent fluctuations both in their terms of trade and in their balances of payments than the industrialized countries. Most of them have, over the past decade, experienced a serious worsening of their terms of trade. I question whether the extent and effect of this are fully recognized by governments of the more highly industrialized countries. For many, the economic consequences have been serious. This unfavorable economic experi- ence has led to undesirable political reactions. It is not a good thing that a sense of grievance should have grown in the less developed primary producing countries, a sense of grievance which will strengthen if they believe that no serious efforts are being made by those more fortunately placed to face up to their problems. In the course of his speech yesterday, Mr. Black, in commenting on how the industrialized countries had been favored by the swing in the terms of trade, gave as an illustration the position of one European country, whose experience he said is reasonably typical, which found its total import bill in 1961 about 8 per cent less than it would have been had 1956 prices still prevailed. I can give an illustration running the other way, from the experience of my own country. What the deterioration in our terms of trade has meant to us in loss of export income is quite dramatic. Last year our exports totaled in value something over <£ stg. 860 million. If we had received the same prices for the goods we exported in 1961-62 that we received in 1953, our export income would have been the greater by <£ stg. 330 million. In other words, our terms of trade today stand at 67 as against 100 in 1953. I am not crying "poor mouth" for Australia. We have been more fortunate than many other countries, in that we have had a strong capital inflow through the past 10 years and indeed for most of the postwar period. We have a strong, well-diversified economy and a high standard of living. But our experience gives us some insight into the way this adverse movement has affected other primary producing countries. It is just not good enough that this problem of imbalance between the wealthier industrialized countries and the less devel-

©International Monetary Fund. Not for Redistribution 80 SUMMARY PROCEEDINGS, 1962 oped primary producers should be politely ignored year after year, or at best given mere lip service. Words are comforting but can lead to frustration and resentment unless followed by action. I say this in no criticism of the Monetary Fund or the other institu- tions represented here. On the contrary, the Fund and its allied institutions have done us a service by keeping this matter persist- ently under notice. It has featured prominently in the speeches made at these meetings by the President of the International Bank and the Managing Director of the Fund. But we Finance Ministers cannot continue to ignore positive action with a clear conscience. We are all men of some influence in our own Governments. We cannot merely vote some addition to the resources of the Fund, the Bank, the Corporation, or the Association, and then wash our hands of the problem. I do not want to go over the same ground that I covered yester- day, and yet I feel there is no more important matter for me to talk about at these meetings. Should the United Kingdom enter the European Economic Community, a new era would commence in the political and economic history of the world. It would seem that the Commonwealth Prime Ministers, meeting in London, have reached broad understanding on four main needs: the need to work for an expansion of world trade; the need to improve organization of the world market in primary foodstuffs through a fresh approach to international commodity agreements; the need to recognize that opportunities for trade are no less important than aid; the need to regulate disposal of agricultural surpluses so as to help peoples in want. These are all commendable objectives. How quickly can they be translated into practical action? We are all conscious that while negotiations are proceeding on British entry there have been uncertainties created which, if unavoidable, have had their unfavorable economic repercussions on many economies. It is in the interests of all that these uncer- tainties should be resolved as speedily as practicable. But while they remain, here are some of the questions being asked by those countries which will be outside such an enlarged and increasingly powerful grouping. Will there be reasonable opportunities of access to this enlarged European market? Will this vast economic com-

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munity pursue inward-looking policies at the expense of the interests of those outside, or can we reasonably hope that the enlarged community will so conduct itself as to usher in a more liberal trading system for the world? Some underdeveloped countries fear that they will henceforth be regarded as merely hewers of wood and drawers of water. One of the major purposes of the enlarged European community will be greater efficiency and higher productivity. Will this be allowed to prejudice the growth in the less industrialized developing coun- tries of their own manufactures? For many people, questions such as these breed apprehension. We would welcome at this meeting some forthright expressions from spokesmen for the countries of the Six, from the United States, and from the United Kingdom that they are determined to work together for a better balanced economic development, for a wider sharing of the abundance which is within our reach, and for a wider spread of social justice contributing to the peace and happiness of the world. All of us here can play some part in the creation of a better world economic order for mankind.

STATEMENT BY THE GOVERNOR FOR INDIA

Morarji R. Desai

I am happy once again to have in the Report of our Executive Directors a record of continued good work by the Fund. The year under review registered a new high level of Fund transactions: purchases, stand-bys, as well as repurchases, exceeded substantially last year's totals. If this growing volume of business may, in a sense, be taken to indicate how far the world is still from achieving a stable and satisfactory payments situation, it is also, undoubtedly, an index of the growing sensitivity of the Fund to the emerging imbalances and the increasing readiness of member countries to regard resort to Fund borrowing—as well as repurchases—as suitable and legitimate rearrangements between their first and their second line of reserves, rather than as reluctant responses to an exceptional situation.

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The Managing Director, Mr. Jacobsson, has in his thoughtful and stimulating address outlined the salient developments in the world's payments situation. He has also pointed out the directions of further advance. I share Mr. Jacobsson's optimism on the whole, although I think we cannot afford to forget even for a moment that the less developed countries will have difficult problems to face for many years to come. There has been, over the year, considerable improvement in the relative payments positions of the industrialized countries. However, pressures developed from time to time in respect of one currency or another and, notably and understandably, in respect of major reserve currencies. With the near completion of the Fund's borrowing scheme, our defenses against speculative attacks on major currencies are stronger. The stability of the world's payments system is to that extent assured. It is, however, not to be expected that the Fund can rest on its oars. It is clearly not enough to have machinery that would avert or mitigate crises in balances of payments. A situation in which almost every country has to try, perhaps by turns and with a few breaks, to coax into its vaults, through deflationary measures at home, a bit of the other countries' gold and foreign exchange reserves is not conducive to maximum growth either of output or of trade. The task, therefore, is to build up an international system of payments that will secure better fulfillment of the wider objectives of policy, namely, full employment and rising levels of income for all members of the international community. It may well be that some of the apparently radical solutions that have been put forward in this field, but have not yet been found practicable, offer valuable pointers to the direction in which further moves ought to be considered. The Executive Directors and the staff will, I hope, keep the possible approaches continuously under study. Discussions on the world payments situation run, for the most part, and for good reasons, in terms of major currencies and the relative movements of reserves as between the more industrialized countries. But, the imbalances in external accounts of primary producing countries and of countries in the early stages of indus- trialization are a no less vital problem. Few of them can hope, despite their best efforts, to build up foreign exchange reserves to

©International Monetary Fund. Not for Redistribution GOVERNOR FOR INDIA 83 any great extent, save possibly at the cost of postponing vitally needed investments and reducing the growth rate of their econo- mies. I am glad the Fund follows a reasonably liberal policy in regard to requests for accommodation from countries that have suffered adverse turns in the terms of trade or have other short-term problems to get over. In this connection, I am happy to note that the problems of mitigating the losses on account of sharp falls in commodity prices are under examination in the UN, FAO, and OAS, and that the Fund is associated with these studies. I was particularly happy, Mr. Chairman, to note the stress in your address on adaptation of the Fund's policies to the needs of the under- developed world. This adaptation will need continuous study on the part of the staff, and resourcefulness on the part of the manage- ment. In that context, it is, I feel, important that the Fund continues and pushes further its accepted policy of ensuring adequate representation to the newly developing countries, both on the staff and at the higher levels of management. On policies regarding the use of the Fund's resources, the Annual Report has brought the position up to date. The Fund has developed a tradition of helpfulness and adaptability which, I am sure, is fully appreciated by all. I made last year a few suggestions regard- ing the use of the gold tranche and the unnecessary distinction being made between drawings per se and drawings against stand- bys. I do not propose to repeat these points, but I must mention that I regard them as sound and feasible. I find the discussion in the Annual Report on the importance of financial stability in relation to growth objectives entirely acceptable. Inflation is no answer to the inadequacy of real resources. In no case can it be a substitute for effective mobilization of savings for investment. Fiscal and monetary policies have, at the same time, a developmental role. Briefly, financial or monetary stability is a necessary but not a sufficient condition for develop- ment. Efforts along many other lines are essential, and it will, I am sure, be recognized that they are being made in increasing degree in a number of countries. The major tasks, both national and international, of what has aptly been called the Development Decade have been outlined admirably in the recent Report of

©International Monetary Fund. Not for Redistribution 84 SUMMARY PROCEEDINGS, 1962 the UN Secretary-General. The developing countries have to raise the maximum of resources they can domestically. They will also need substantial external assistance. All of them will have to concentrate in increasing degree on the enlargement of exports. I think the time has gone by when an increase in the levels of trade as between the more industrialized countries could be taken as a satisfactory index of the growth of the world economy. The emphasis has, obviously, to change in favor of promotion of trade between the more developed and the less developed countries— and, undoubtedly, between the less developed countries them- selves as their economies get more and more diversified and the overheads of foreign trade, such as trade organizations, transport, and banking facilities, develop. In this context, let me re-emphasize the need, admitted by all in theory but not yet fully reflected in practical policies, on the part of the industrialized countries to throw open their markets more widely to the products of developing countries. Finally, a word on the Indian situation. We are now in the second year of the Third Five Year Plan. Our balance of payments has been continually under strain and, although we have been able to secure a significant proportion of the external assistance needed for the implementation of the Plan, there have been difficulties because of the insufficiency of untied or freely usable aid. It would hardly be proper for me to go into the details of our requirements or of what has already been agreed to or authorized. In the situation we are facing, a certain proportion of external assistance has to come in the form of nonproject aid or commodity assistance, to enable us, without excessively elaborate procedures and conse- quential delays, to meet our payments for imports of develop- mental commodities needed for utilizing effectively the growing production capacity in the country. Nonproject assistance is also needed to enable us to meet our repayment obligations without having to impose crippling restrictions on maintenance imports. Faced with a paucity of such free resources, and in a situation where some of the assistance available would be disbursable only later, we had to approach the Fund for a stand-by this July. I greatly appreciate the assistance the Fund has given us. We, on our

©International Monetary Fund. Not for Redistribution ALTERNATE GOVERNOR FOR PAKISTAN 85 part, have been exerting our utmost to improve our export receipts. We have made a substantial tax effort, toward the realization of the Plan target, on additional resources. We have raised interest rates as part of the same effort. The price situation has been rela- tively stable, and we are determined to take whatever fiscal or monetary measures are felt to be necessary to ensure growth with stability. Our import policy has been stringent and we have recently tightened it further. The tasks of export promotion are being attended to with earnestness and vigor. Where the claims of domestic consumption and of exports compete, the latter get due priority. There are developments or possible developments in Europe which might affect our export prospects adversely. I touched earlier on the lines along which the interests of developing countries in the sphere of world trade need to be safeguarded. I have every hope that with the continued effort on our own part in India and with the good will and cooperation of international agencies and members of the world community, we shall find the tasks of the Third Plan manageable, despite all their inherent difficulties. I should like, before I conclude, to express my appreciation of the valuable services the Deputy Managing Director, Mr. Cochran, has rendered during his term of office. Mr. Cochran has intimate knowledge and understanding of the problems of the East, and he brought to bear on his tasks so much good will and cooperative spirit. I wish to extend to him my best wishes on the eve of his retirement from the Fund. I should also like to say a word of welcome to the incoming Deputy Managing Director, Mr. Frank Southard. Mr. Southard has for long been a part of the Fund scene, if I may put it that way. I have no doubt that the Fund will be the stronger for his association with it in this new capacity. I extend to him my warm good wishes.

STATEMENT BY THE ALTERNATE GOVERNOR FOR PAKISTAN

Mumtaz Mirza I am glad to have an opportunity again to meet my fellow Governors and to join them in congratulating the management and

©International Monetary Fund. Not for Redistribution 86 SUMMARY PROCEEDINGS, 1962 staff of the Fund on the further significant contribution which the use of the Fund's resources during the year made in strengthening the international economy. I am also happy to note that many new members have joined the Fund. The scope of international monetary cooperation is thus being enlarged and the international character of the Fund further strengthened. It is encouraging to find that the past two years have been characterized by an increasing number of currencies purchased from the Fund. The fact that in repurchase operations a wider use was made for the first time of several currencies is another welcome development. The greater use of currencies other than the dollar has undoubtedly constituted a step toward the integration of the Fund operations into a multilateral system of world payments as originally envisaged. It appears from the Report that though the payments position of some countries reached a near balance, certain important ele- ments of imbalance continued to persist in world payments during the year. A comforting feature, however, is the movement toward the greater international coordination of monetary policy to which the Fund Report particularly draws attention. The Report mentions many instances of determined efforts made during the year toward defending the existing monetary structure. National monetary authorities appear to be showing growing awareness of their international responsibilities while dealing with the new problems posed by widespread convertibility. At the last Annual Meeting, we had discussed at length the question of increasing the Fund's resources through borrowing under Article VII of the Fund Agreement. I am glad that the Executive Board took, in January 1962, a decision on general arrangements to borrow. High hopes have been raised by these borrowing arrangements, which provide another example of the growing tendency toward international solidarity in the monetary sphere and constitute a significant step toward the solution of the world liquidity problem. This approach to the solution of the world liquidity problem is highly commendable in that it did not require any change in the structure of the Fund or in its Articles of Agreement.

©International Monetary Fund. Not for Redistribution ALTERNATE GOVERNOR FOR PAKISTAN 87 While one finds immense possibilities for world economic prosperity in the solid foundation laid for international economic cooperation, I feel that we cannot overlook the fact that the over-all balance of payments position of the less industrialized group of the primary producing countries showed an adverse swing from a surplus of $500 million in 1960 to a deficit of $700 million in 1961. A large part of the deficit was financed by drawings from the Fund. Although the substantial assistance which the Fund provided to these countries is commendable, this does not lessen our concern about the situation. We have to recognize that the Fund is intended to deal with the short-run disequilibrium in balance of payments which is assumed to be temporary and self- correcting. It is not the responsibility of the Fund to pay any attention to the long-term problems with which the less industrial- ized countries are mostly faced. For a lasting improvement in world trade and payments it is, therefore, of crucial importance that fresh thought should be given to the problems of the less devel- oped countries in matters of international economic cooperation. This is not to deny the benefits of international cooperation already accruing to underdeveloped countries. The high ratio of foreign aid and loans to total resource availability in many devel- oping countries clearly demonstrates the extent of this cooperation. What I want to emphasize here is that new efforts need to be made in this field. Although the contribution of foreign aid and loans in the acceleration of growth rates in less developed countries has been substantial, these countries cannot and should not perpetually depend on foreign assistance for their economic development. A sound foreign aid program should help to shorten the period in which the less developed countries can achieve self-sustained economic growth. Foreign aid would thus peter out in course of time. In many underdeveloped countries there is an apprehension —on the basis of current experience, of an almost stationary level of earnings from old export products and insufficient access to markets in the case of new products—that even in the long run their export proceeds will fall short of their import requirements. In view of the expected lag in exports, a shift in favor of heavy indus- tries in their development programs is being accepted in some

©International Monetary Fund. Not for Redistribution 88 SUMMARY PROCEEDINGS, 1962 countries as a compelling necessity. Some underdeveloped countries are thinking in terms of regional pacts so as to ensure export outlets. If these trends intensify, there is every likelihood of fresh diversion in world trade and misdirection of world economic resources. We, therefore, look to the industrial countries to broaden their responsibility toward the underdeveloped countries in the interest of an orderly development in international trade. The industrial countries should not only shun all policies aimed at restricting the inflow of goods from the developing countries, but, on the contrary, should provide the latter increasing access into their markets. It is only by pursuing such liberal policies that we can hope to see the dawn of a new era of world prosperity. The underdeveloped countries like mine are particularly per- turbed at the recent developments in the pattern of international trade. Regionalism which was being persistently denounced at international forums is now replacing multilateralism at one time considered to be the only method of liberating international trade from the fetters of bilateralism or regionalism. It was very refreshing to hear the highest monetary authority advocating the claims of multilateralism in the financial field. I hope this idea will run through all matters economic. But it needs no elaboration that financial and commercial activities in the global context have a common destiny and must be governed by common principles. May I point out that it has been our constant endeavor to conform to the Fund's objectives and that considerable progress has been made in this direction in recent years. Physical controls have been rapidly dismantled, and Government has sought to create conditions highly favorable for the operation of market forces and incentives. There has been a substantial measure of import liberalization. Despite the pressure on foreign exchange reserves, my Government remains firmly committed to the policy of maintaining a liberal flow of imports and is definitely averse to reverting to import restrictions. In fact, the area of freedom in import trade is being steadily enlarged as resources permit. At the same time, notable progress has been made in working off the excess demand from the economy

©International Monetary Fund. Not for Redistribution GOVERNOR FOR PHILIPPINES 89 and promoting monetary stability. Perhaps the most outstanding feature of our economy in recent years is that the tempo of develop- ment activity has been accelerated in the framework of over-all stability. The success with the stabilization program is so striking as to evoke complaints that the economy is approaching a defla- tionary situation. We, however, realize that such complaints are a familiar feature of a stabilization program and, therefore, while ensuring that the economy works at its full capacity, propose to continue our policy of striking a balance between claims and resources. In fact, it is by setting our own house in order that we expect to reach our external balance, for it is our conviction that, however comprehensive and spectacular the stabilization program may be, its effects prove short-lived unless it is supported by basic adjustments and reform internally. Before I conclude, I would like to take this opportunity to join my colleagues in expressing my appreciation of the most valuable service which Mr. Cochran has rendered the Fund, and the wise counsel which he has always given to the member countries individually and, above all, the remarkable understanding which he has shown in dealing with the problems of weak economies. I wish Mr. Cochran long years of health and well-earned rest.

STATEMENT BY THE GOVERNOR FOR THE PHILIPPINES

Andres V. Castillo

I am happy once again to see so many familiar faces at this, the Seventeenth Annual Meeting of the Board of Governors of the International Monetary Fund and the International Bank for Reconstruction and Development. I am also glad to see several new ones, the honorable Governors for the fledgling member nations. I join with my colleagues in greeting them and welcoming them to the deliberations of this body, and wish them every success in their efforts to advance their economies within the larger frame- work of international cooperation in monetary and trade policy called for by their new status as members of the Fund.

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For us in the Philippines, this has been a most auspicious year, in the light of the Fund's overriding objectives to promote the realization of a free and unrestricted flow of trade and payments throughout the world. Early in the year, I am gratified to report, we virtually completed the final phase of our gradual decontrol program, resulting in the lifting of the remaining quantitative restrictions on imports and foreign exchange transactions, as well as a readjustment in the exchange rate for the peso to more realistic levels, as determined by the operations of a free market. In a series of decisive and coordinated moves, the monetary authorities, with the full support of the new Administration, were able to eliminate direct controls and pave the way for the achievement of a unitary exchange rate at a level which could best reconcile the establishment of internal stability with external balance. This is an extremely difficult task, as you very well know, for an underdeveloped country engaged in the process of developing her economic facilities under conditions of limited financial and technical resource availabilities. In the Philippine case, import and exchange restrictions were first resorted to more than a decade ago, under the provisions of Article XIV of the Fund Articles of Agreement, as instruments of national policy in the face of serious balance of payments difficulties and the massive requirements of economic reconstruction and development. However, the monetary authorities never lost sight of our commitment as a member of the Fund to bring about conditions under which direct controls could be safely dismantled and free convertibility restored at the earliest possible time. The yearly consultations with the Fund have borne much fruit by way of objective analyses of the problems and effective prescriptions for their resolution. It must be emphasized that in meeting its problems, a developing country cannot very well fall back on the classic theories which have generally been formu- lated for application in the more advanced economies. In the determination of its policies, the developing country must exercise discernment in the application of established concepts, with a critical consideration of its particular situation, and must frequently reshape or innovate where necessary. Let me say that, in this respect, the Fund's advice and assistance have been of great value to us.

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Philippine economic development proceeded at a better than satisfactory pace on the whole, with alternating cycles of rapid growth followed by retrenchment and stabilization, so that by early 1960, the monetary authorities deemed that a stage had been reached when decontrol would not only be feasible but would work toward providing a better environmental framework and a more dynamic basis for the pursuit of future growth. The lifting of our controls was accomplished in four gradual stages. This was decided upon, rather than an abrupt return to free enterprise and convertibility, in order to spare the economy from an undue dislocation in operations arising from a sudden readjust- ment of internal prices to the prevailing international levels. The first stage established a limited free exchange market covering one fourth of total transactions. Subsequent phases enlarged this con- trolled free market to half, and then to three fourths, of the total exchange transactions. The final step was taken last January, with the advent of a change in government administration. For the first time in postwar history, the Government officially adopted an Integrated Socio-Economic Development Program, which among other things called for the complete abolition of controls as a means of restoring stability to the business climate, providing incentive for the expansion of exports and the strengthening of the balance of payments, attracting foreign capital and credits, and establishment of a foundation for proper valuation and long-term planning by both public and private sectors alike. All foreign exchange transactions for imports and invisibles were therefore released to the free market, when the peso was unpegged from its administratively fixed rate and allowed to seek its actual market value in relation to foreign currencies. On the export side, however, one fifth of receipts were temporarily retained at the old exchange rate for revenue and stabilization purposes. The Fund gave early approval to our decontrol program, which also included corollary fiscal and monetary safeguards against inflationary stresses and strains during the sensitive period of readjustment. These complementary policies to ensure monetary stability are indispensable to a smooth and effective transition from a controlled to a free market system while sustaining a desirable magnitude of

©International Monetary Fund. Not for Redistribution 92 SUMMARY PROCEEDINGS, 1962 development and growth. As we recognize, and as the Fund has often emphasized, the optimum levels of saving, investment, and economic activity are realizable only under conditions of stable money and confidence in the currency. Furthermore, the interna- tional value of a national currency would very well depend on the soundness or the fickleness of internal economic and financial policies. For it is axiomatic that whatever reserves in gold and foreign exchange a country possesses, international confidence in its currency tends to rise or diminish with the stability or instability of the domestic monetary situation. For our part, the fiscal and monetary authorities have imple- mented a policy of selective discipline over credit and budgetary operations during the first semester of this year. Reversing the previous year's policy of ease, commercial credit restraints were re-established and maintained on the whole, without, however, denying the essential requirements of business, industry, and agriculture. Rediscount rates and reserve requirements were raised to 6 per cent and 19 per cent, respectively, but a preferential rate of 3 per cent was maintained for production and importation of prime commodities. Rediscount quotas for the banks were estab- lished. Special time deposits were required against which import letters of credit could be opened. This requirement, however, was relaxed later in the semester by the exemption of all essential items and capital goods. As a result, excess reserves of commercial banks declined, and the increase in credits granted slowed down to only 1 per cent this past semester compared with a 20.5 per cent expansion during the previous six-month period. Total money supply, which had risen by 9.4 per cent in the second semester of last year, contracted by almost 1 per cent this year. On the fiscal side, prudence in government spending and vigorous tax collection characterized operations during the first six months, so that a surplus (P 112 million) was recorded in the Government's cash balances. The balance of payments position has also been definitely strengthened by recent developments, with foreign exchange receipts increasing appreciably to an aggregate volume

©International Monetary Fund. Not for Redistribution GOVERNOR FOR PHILIPPINES 93 far larger for the first semester this year than for corresponding periods in the three preceding years. Both production and shipment of export commodities recorded significant acceleration. Further- more, the international reserve has remained substantially intact at around $130 million, while foreign exchange obligations and commitments have been cut by more than half. To further ensure the successful readjustment of the economy after the elimination of controls, and inspire an added measure of confidence on the part of business and industry, we have mobilized a Stabilization Fund from various sources. I wish to express my country's satisfaction at the prompt and effective way in which the Fund responded to our request for a stand-by credit arrangement. Our expression of appreciation also goes to the United States Treasury, and to various large private financial institutions who have provided substantial stand-by accommoda- tions, which we do not expect to draw on, but which nevertheless constitute an available reserve against any contingencies that should arise in the balance of payments situation. There has occurred a moderate upward movement in domestic prices. However, prices had already been on the uptrend even prior to the elimination of controls, due to programed hikes in import tariff rates under our trade agreement with the United States, as well as business hedging in anticipation of higher exchange rates. What is surprising is not the rise in prices over the first semester of the year, but the moderate size of the rise in view of the degree of exchange devaluation. The effects of the complementary meas- ures of credit and fiscal discipline have undoubtedly played impor- tant roles in tempering the unsettling impact of the transition from a regime of controls to a free enterprise system. As is aptly stated in this year's Annual Report: "The Fund recognizes that the process of economic growth itself is likely to create pressures on resources that may lead to price increases and that not all price increases are incompatible with sound development." The success of our decontrol program, with its accompanying stabilization measures, has been reflected not only in the significant sectors of money and credit, public finance, prices, trade, and

©International Monetary Fund. Not for Redistribution 94 SUMMARY PROCEEDINGS, 1962 payments, but in the behavior of the exchange rate for the peso, which has been exhibiting remarkable stability since mid-May this year. The fluctuations in the rate have been less than 1 per cent over the past three months, and we are justifiably gratified by the fact that this stability has been achieved without the formal inter- vention on the market by the Central Bank. In short, the performance of the peso has fortunately exceeded previous expectations, and speculative operations which charac- terized the market in its early months have largely disappeared. Instead of the capital outflow which had been predicted by over- anxious economic observers, we have experienced an inflow. Substantial interest on the part of foreign capital in investment prospects in the country has been manifested. The initial stumbling blocks seem to have been hurdled, and the economy is definitely on its way to efficient operation under the new institutional frame- work. I cannot help but emphasize at this point that the important elements behind the satisfactory progress of our program are the full understanding and support of our President and our people and the prompt cooperation we received from the Fund, the IBRD, and the United States. As we gain in experience, we may acquire a better grasp of the problems and a greater proficiency in their solution. While conditions may not compel a drawing on the Fund's resources, we shall always welcome the proven value of Fund advice. We trust that our experience in stabilization and decontrol, together with the experiences of other countries which have been notably successful in their efforts, such as Spain and Peru, may provide beneficial guideposts to other members in seeking practical and effective solutions to their own problems, In the task of attaining a high degree of development with stability, we hope we may continue to count on the understanding and assistance of the more advanced members. Much has already been said on this point, but I believe it is well worth repeating again. In the hands of economically advanced countries lies a matchless opportunity to help bring the developing nations closer to the goals to which their people aspire, not through more aid, but through more trade. If the industrial countries would act with greater sympathy and liberality of policy toward the attempts of

©International Monetary Fund. Not for Redistribution ALTERNATE GOVERNOR FOR CEYLON 95 the developing economies to earn larger foreign exchange incomes through their exports, a great void of development capital could be filled which would reduce the necessity for development aid. The specific role of the Fund in influencing the advanced coun- tries toward this objective is still to be explored and exercised, but I need not emphasize how significant a role it could be, particularly for the developing nations of the world, many of them newly emerging to political freedom only to face the awesome problems of social and economic progress. The sooner the develop- ing countries attain a satisfactory state of economic well-being, the sooner will world-wide freedom of trade and payments become a reality. I wish to conclude my remarks by paying tribute to Mr. Cochran, who is retiring from his post with the Fund, a post he has occupied for the last decade with distinction, giving invaluable assistance, especially to the developing nations. We wish him the best success in any activity he may undertake.

STATEMENT BY THE ALTERNATE GOVERNOR FOR CEYLON

D. W. Rajapatirana

The Annual Report of the Executive Directors placed before us is an excellent one containing not only a concise account of the work of the Fund during the last year but also a review of the year which is most instructive and helpful to member countries. We note that in every sphere of operational activity it was a record year; we also note that, in the year under review, the Fund has served much more fully than in any other year of its history as the multilateral revolving fund envisaged 18 years ago at Bretton Woods. We have seen during this period of 18 years, and if I may say more particularly, in the last few years, satisfactory settlement by the management and directorate of the Fund of some problems vitally affecting the economies of the world. To quote just a few instances, the Fund has tackled with success the problem of par values for various currencies; the shortage at one time of a

©International Monetary Fund. Not for Redistribution 96 SUMMARY PROCEEDINGS, 1962 key currency, the dollar, and its consequences; inflation at one time in many countries; inadequacy of resources of the Fund; convertibility of major currencies; and last, but not least important, the successful negotiations leading up to the availability of some $6 billion to meet any large international movement of funds, particularly speculative capital, to prevent thus any slowing down of the major economies of the world. There remains, however, one very important and difficult objec- tive, namely, the achievement of satisfactory economic growth and high levels of employment which will lead to the amelioration of standards of living of more than half the world which, to a large extent, was a responsibility in the recent past of the colonial and imperial powers of the past. That responsibility international bodies like the Fund must now discharge, with international cooperation from its members. Men of the highest learning in the social sciences have over and over again drawn attention to the danger in an interdependent world of one part of the world living in comparative luxury, worry- ing about surplus calories, while another part of the world more numerously populated has to worry where it can find the means to get its already deficient calories. We know ours is a speedy world when it comes to such things as military science, spacecraft, etc.; but when it comes to social sciences, it is a slow world to catch up with the ideas of its best brains in that field. Thus the world lingers just inside the very doorstep of what is its undoubted responsibility. The situation is getting really serious. The Fund Report points to the 1961 experience which is a serious one, namely, that in a year of "high activity in Western Europe and of increasing output in the United States and Canada," the prices of primary products, which these poor countries must depend on in the economy as previously ordained for them by colonial and imperial powers, declined to the detriment of these poor countries. Today, most developing countries are facing the problem of deficits in their balance of payments, and there is a crying need to have an active demand for the products of these developing countries. But, what is the position? Statistics will show that, while world trade is increasing, that increase is much faster in the trade

©International Monetary Fund. Not for Redistribution ALTERNATE GOVERNOR FOR CEYLON 97 between developed countries, i.e., among themselves, than the trade between the developed countries and the developing countries. There is, therefore, no wonder that developing countries are now faced with a heavy erosion of their external purchasing power just at the very time when their need for imports is progressively increasing. Superimposed on this declining trend in export prices as a consequence of the low demand are the erratic short-term fluctuations of these prices. In 1961, cocoa and copra, for instance, dropped as much as 20 per cent as pointed out by the Report itself. There can be little doubt that the persistent shortage of foreign exchange of developing countries is inhibiting the growth of free and multilateral international trade and is also adding to infla- tionary pressures in these developing countries—results which we all agree are not in keeping with the ideals of the Fund; but the application of sound economic policies to these developing coun- tries—to use Bismarck's immortal phrase regarding politics—is the art of the possible. The will and the determination to apply stronger fiscal and monetary policies to meet inflation—stronger because some of these are even strong already—is moderated by political considerations, and that is the price of democracy. As I said before, the Fund has a good record of achievements, but our international community on monetary and financial matters cannot go forward ignoring the conditions of low economic growth and even stagnation at times in the developing countries, with its vicious circle of shortage of external finance resulting in policies leading to inflation, which in turn soon aggravate the deficit in the balance of payments. The Fund has shown a clear awareness of the problem in engaging in studies in compensatory financing and in the increasing assistance given to the developing countries in recent years, but this assistance is only a trickle compared to the drop in commodity prices of 14 per cent between 1959 and 1961 which wiped out nearly $6 billion from the export earnings of these less developed countries. It is the hope of Ceylon, and I am sure of the many countries similarly situated, that the Fund will exert its high prestige and employ its talents to the benefit of the trade and payments of these developing countries.

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In conclusion, may I, on behalf of Ceylon, thank the Fund, its staff, management, and directorate for the kind consideration we have received at all times. I wish also to express our sincere good wishes to our friend, Mr. Merle Cochran, the retiring Deputy Managing Director, and welcome very warmly also a very good friend, Mr. Frank Southard, the successor in the post.

STATEMENT BY THE GOVERNOR FOR SOUTH AFRICA

T. E. Donges

I find it a little difficult to share the optimism which has been expressed regarding the present international financial situation. The primary producing countries, which have suffered so much in recent years from deteriorating terms of trade, and the reserve currency countries, whose balances of payments have from time to time given so much cause for concern, can surely not be com- pletely happy with the present position. During the past three years, the Annual Reports of the Fund have mentioned a considerable number of measures designed to strengthen the stability of the international monetary system in general and the two major reserve currencies in particular. It would be difficult to recall a period when so many expedients to this end have followed so rapidly on one another. The announcement of each new device is usually accompanied by a claim that its adoption will provide an adequate level of international liquidity for the foreseeable future. Nevertheless, these experiments, which all involve an increase in international indebtedness, continue to multiply. Moreover, each new expedient is greeted with growing skepticism, now more openly expressed, in a widening circle of informed opinion. All this suggests that little scope for further maneuvers of this sort remains before the pressure of basic economic realities obliges us all to get down to bedrock. The bedrock of international finance is gold. We have for many years advocated a revaluation of all currencies in terms of gold as the only fundamental means of

©International Monetary Fund. Not for Redistribution GOVERNOR FOR SOUTH AFRICA 99 increasing international liquidity, the essential basis for expanding world trade and prosperity. I do not wish to repeat all the arguments again, but rather to draw attention to a few aspects of special relevance to the problems of today. We have heard convincing statements emphasizing the need for a strong and stable dollar. We agree wholeheartedly. Any proposal which would be likely to endanger the prestige or the stability of either of the two main reserve currencies would be a perilous leap in the dark. The course which we advocate would have the very opposite effect, if it is carried out in the following manner. Firstly, the par values of all currencies in terms of gold must be changed by a uniform percentage—except, possibly, in a small number of cases where some intercurrency adjustments may be considered desirable. Secondly, the change must be made in a planned and orderly manner, simultaneously for all currencies, and within the framework of the Fund. Thirdly, the change must be substantial enough to discourage any speculation regarding further adjustments in par values. Such a procedure would provide a firm foundation for real exchange stability, particularly in the case of the leading reserve currencies where it would do the most good. No holder of dollars or sterling would suffer loss. Indeed, confidence in the dollar and in sterling would in fact be enhanced, since the substantial strength- ening of the American and British gold reserves would render the position of these currencies virtually unassailable. Disturbances in the world exchange structure would be minimal, and any infla- tionary potentialities of the move, which in present world conditions could hardly be regarded in a serious light, would in any case be well within the control of the authorities. The psychological effects of any move to strengthen exchange stability must always be considered, for confidence is the soul of finance. The recurrent use of special gimmicks to bolster currencies, particularly reserve currencies, is itself damaging to the prestige of the currencies concerned, and is, I believe, actually contributing to the unease regarding currency stability. On the other hand, a substantial, once-for-all appreciation of gold in terms of currencies

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generally would have considerably less adverse psychological impact on the man in the street than an increase in the prices of the commodities he uses daily. A revaluation of gold in terms of all currencies would have significant advantages, not only for the reserve currency countries, but also for other industrial countries. It is true that many of these countries now have substantial reserves of gold and foreign exchange. But the over-all shortage of liquidity has led to repeated calls upon these countries to erect a still greater superstructure of international credit on the narrow base of the existing monetary gold stock. If this process should come to a halt, then these countries can expect an effort by others to capture from them a portion of their gold and foreign exchange reserves. In such a scramble for liquidity, world trade and world prosperity would be the losers. Furthermore, it is of the utmost importance, not only to them- selves, but to the whole free world, that the major industrial nations should maintain high levels of employment and an adequate rate of economic growth. In many such countries the position is hardly satisfactory today. So long as levels of international liquidity are relatively low, however, these countries may find it difficult to apply appropriate domestic economic policies because of the effect of such policies on the balance of payments. Higher levels of liquidity, brought about by a revaluation of currencies in terms of gold, would give these countries far greater scope and time for taking purposeful steps to increase the tempo of internal economic activity and overcome the widespread sluggishness that bodes so ill for themselves and other countries. Many of the advantages which would accrue to the more advanced countries would redound to the benefit of the less devel- oped countries, particularly through the general stimulation of world trade and tie maintenance of the demand for primary prod- ucts. In addition, the advanced countries would be placed in a far better position to carry the burden of their international obligations, including aid to the less developed countries, and to face an increase in such aid with equanimity. But there are other more direct advantages which the less developed countries might expect to

©International Monetary Fund. Not for Redistribution GOVERNOR FOR SOUTH AFRICA 101 gain. A higher gold price would not only discourage new private hoarding—which, together with industrial and artistic demand, absorbed considerably more than half the available gold supplies between 1950 and 1961, but would also draw gold out of private hoards into official reserves. Since private gold hoarding is carried on extensively in many less developed countries, these countries would benefit appreciably. In India alone, for example, it is esti- mated that privately held gold amounts to some $3 billion. In addition, gold production, which takes place in many of these countries, would be encouraged. Let us be realistic and recognize the fact that, despite the many sophisticated expedients adopted in recent years to curb, at least temporarily, the demand for gold, this demand still persists as it has done for many decades. It is neither edifying nor profitable to continue the unnecessary struggle among the nations of the free world, each to obtain the gold which it feels it needs out of an inadequate new supply and thus largely at some other country's expense. This can only have depressive effects on their own internal economies and on the growth of world trade and finance. And if Russia and its allies benefit from a higher gold price and increased international trade, so obviously does the West. Most countries, after all, are quite prepared to trade with the Communist group, for while this trade may benefit Russia and its allies, it benefits equally their trading partners in the free world. The Russian issue, in fact, is quite irrelevant to the main problem. In matters of finance, it is not only what we do, but how and when we do it, that is important. I believe that a revaluation of currencies in terms of gold is ultimately inevitable; the signs are there for all to see and, to that extent, gold can be left to speak for itself. But I think it would be dangerous to wait too long. We need now a measure to prevent a decline in confidence rather than another nostrum which may temporarily alleviate the symptoms of the malady, but with ever-diminishing effect. I plead once again, therefore, for this step to be taken in good time and in a planned and orderly manner, so that the necessary conditions for an expan- sion of world trade and prosperity can be created with the least possible disturbance to international financial stability.

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The Annual Meeting of the Fund provides an excellent forum for expressing and hearing the opinions of Governors. These opinions will not, and need not, always find general agreement. That is a virtue rather than a cause for concern, provided such opinions are honestly held and are designed to further the general aims of the Fund. Out of the clash of opinions, the truth is often born. And without it, there is always the danger of stagnation. What has been called "divine discontent" has the merit that it shows a desire to do better and better. I therefore personally wel- come the many constructive criticisms that have been made— particularly by the Governor for the United Kingdom—and trust that all these criticisms will be fruitfully pursued on their merits. May I, in conclusion, join in paying tribute to Mr. Cochran's long and distinguished service with the Fund. His courteous presence will be missed. We wish him all of the best for the future. At the same time we welcome his successor, Mr. Southard, and wish him many further years of fruitful service with the Fund.

STATEMENT BY THE GOVERNOR FOR AUSTRIA

Reinhard Kamitz

I would first of all like to congratulate the Managing Director on the lucid and far-sweeping analysis of the international payments situation which he presented in the Annual Report and in his open- ing address. His statements were, as always, to the point and deserve the greatest attention by all of us. I note Mr. Cochran is going to retire from his present job. I want to express my thanks to him for all he has done in his capacity as Deputy Managing Director to make the activities of the Fund successful, and I want to wish him good luck for the future. His well-informed opinion and his advice have always been of great value to me, and I would like to add that it always gave me great pleasure to discuss difficult monetary questions and problems with Mr. Cochran.

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His successor, Mr. Southard, is very much welcomed by our delegation. One of the criteria by which we can measure the success of the activity of the IMF is the number of countries which have been able to accept the obligations of Article VIII; this number has steadily increased over the past several years, and I am happy that Austria has, as of August 1962, joined the ranks of Article VIII countries. The Fund has been most successful in strengthening and expanding international monetary cooperation, which has had very beneficial effects on the world foreign exchange markets. International cooperation in the monetary field owes a great deal to Per Jacobsson, under whose stimulating leadership the Fund has not only stepped up its activity significantly, but has also gradually adapted itself to the changing conditions prevailing in the world economy. The kind of flexibility in the Fund's attitudes and policies which emerges from the statement of the Managing Director is of the utmost importance. It is very fortunate that an increasing number of countries are now realizing the economic rationale of the Fund's policies and have learned through their experience that observance of policies recommended by the Fund works to their own best advantage. It was very wise of Mr. Jacobsson to deal in his opening address with the problem of international liquidity. His analysis was clear and convincing, and I am sure it will contribute a great deal to eliminate a number of misleading interpretations which have given rise to many misunderstandings. I would also like to thank Mr. Jacobsson for the emphasis he placed on international coopera- tion and on the coordination of monetary and financial policies. I feel that further improvement in this field would add more than many of us realize to international monetary stability. Austria has, as you all know, a vital interest in European economic integration. I think one cannot stress too often the fact that the fundamental prerequisite condition for international eco- nomic integration is the maintenance of monetary stability. Even though the achievements of the Fund are remarkable, we must never forget that its contribution to monetary stability can and should

©International Monetary Fund. Not for Redistribution 104 SUMMARY PROCEEDINGS, 1962 never take the place of sound fiscal and monetary management in member countries. It is undoubtedly true that in the short run the Fund has the ability, by deployment of its resources, to prop up a weak currency and to curb speculative excesses as well as to help to overcome balance of payments difficulties. But in order to achieve an equilibrium in the long run, every country has to take appropriate internal corrective action. It is sometimes doubtful whether governments will, of their own free will, adhere to such policies or whether the parliaments to which they are responsible will vote for them. Some compulsion to put their houses in order may therefore prove to be helpful. The further progress of the Fund is, in my opinion, intimately related to the problem of whether the Fund can succeed in making its members stick to policies which are correct not only for them, but also in the international context. This is a historical challenge; I hope we shall be able to meet it.

STATEMENT BY THE GOVERNOR FOR ITALY

Roberto Tremelloni

Since our last Annual Meeting, my country's policy has been, as before, consistently directed to the consolidation and defense of the system of convertibility, in acordance with the principles reaffirmed at Vienna and subsequently put into effect by the agree- ment on the Fund's additional resources. As the Managing Director has already mentioned on various occasions, my country was the first to notify its formal adherence to this agreement. The Italian delegation had occasion last year to stress the advantages that international monetary collaboration could derive from using different types of machinery operating within different frameworks—such as the International Monetary Fund, regional institutions, and central banks. In confirmation of this view, new monetary techniques, or rather old ones adapted to present needs, have been adopted by central banks through the practice of mutual credits. My country has played an active part in this; furthermore, it has repaid in advance some of its foreign debts, in an effort to

©International Monetary Fund. Not for Redistribution GOVERNOR FOR ITALY 1Q5 make these nonrecurring transactions serve also the ultimate purpose of strengthening the existing international monetary system and its key currencies. We firmly believe that this purpose is not inconsistent with the Fund's duties toward the world's less industrialized countries; on the contrary, it is an essential condition of the effective discharge of these duties. It is in the conviction that we are acting to the benefit not only of a restricted number of countries and currencies, but indirectly of all member nations, that my country gave sympa- thetic consideration to the measures proposed to extend the Fund's lending power and so to enable it to relieve temporary strains on the international monetary system. It is in the same spirit of responsibility toward all member nations that we shall examine any further measures and decisions that may in the near future be submitted for our consideration. Allow me now to describe in a few words what the Italian monetary authorities have done lately to prevent our country's balance of payments surplus from having harmful repercussions on international liquidity. In the field of foreign trade, we have opened our doors still wider to imports both from the countries of the European Economic Community and from the rest of the world. Within this framework, Italy introduced quite recently a further reduction in the remaining quantitative import restrictions, as well as an additional, independ- ent, tariff cut, applicable to imports of whatever origin. Similarly, in the sector of liberalization of capital movements, Italian residents have been allowed, since November last, to pur- chase foreign currency debentures issued by international financial organizations in which Italy is a member. Almost at the same time, the 1959 regulations authorizing companies to buy shares and subscribe to capital of foreign companies operating in the same field were extended to the purchase of debentures. In February of this year, we abolished the 20 per cent ratio between foreign security purchases and paid-up capital plus reserves, which had previously governed the foreign investments of the so-called special credit institutes and finance companies.

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Domestically, the Italian Exchange Office continued with its spot sales of foreign currencies to Italian banks, linked with forward repurchasing commitments. Taken together with dollar deposits with the banks, the total of these operations reached a figure of $900 million at the end of August this year, against $550 million at the same date in 1961. All this enabled the Italian banking system to improve its foreign currency position and at the same time discouraged the inflow of hot money from abroad. Finally, my country's efforts not to disturb international equi- librium by our balance of payments surplus are well illustrated by the changes which took place during the first eight months of this year in the composition of foreign assets financed by the central bank. The portfolio in foreign securities shows over that period an addition of $370 million which was due to an increase in the purchase of foreign currency and lira securities issued by nonresi- dents as well as to our further repurchases of bonds of foreign loans to Italy. All these measures ultimately work in the same direction, and we believe they represent a worthwhile contribution to those official compensatory transactions which, we all know, have lately been such an essential factor in improving the balance of international payments. A striking development during the last 12 months has been the increasing use of European currencies in the operations of the International Monetary Fund. In this connection, may I point out that Italy has always shown herself most cooperative, not only on the occasion of lira drawings, but also in discussing the principles concerning the selection of currencies for drawings and repayments. I take this opportunity to confirm once more that Italy will not create any obstacle to the international use of the lira, and that we shall be glad to participate in any further attempts to find satisfactory solutions for certain technical problems related to the actual drawings in different currencies. Although we can all agree, I think, with the Annual Report and with the Managing Director's introductory address to the effect that we have lately made progress in international monetary

©International Monetary Fund. Not for Redistribution GOVERNOR FOR ITALY 107 cooperation, we are, of course, also all aware that many problems still await solution. But it is my belief that our path is clearly set. It leads from the extension of mutual facilities, which have been so valuable an element in last year's growing collaboration between monetary authorities, to wider forms of monetary cooperation at the regional and world level, as exemplified by the creation of a masse de manoeuvre of additional resources with the Fund. Moreover, the cooperation between central banks can undoubt- edly be further developed hi organic and technically more efficient forms, instead of the sometimes ad hoc forms which such coopera- tion has assumed in the recent past under the pressure of sudden tensions. It can therefore be said that there is in existence a sufficiently wide range of valid forms of cooperation, which, being based not on unrealistic automatic mechanisms but on the ability of human will and foresight to produce timely and correct decisions, seem to furnish an adequate safeguard for the present international monetary system. In the selection of the forms of action which are regarded as most appropriate for meeting the needs of the changing situation, account must be taken both of the assessment of the position and of the considered choice made by the countries bearing the greatest responsibilities, since it is their currencies which are the keystone of the present international monetary system. The other countries, for their part, will show proof of wisdom and realism if, once this choice has been outlined, they cooperate effectively to ensure the success of the policies proposed, in the knowledge that these policies are designed to safeguard not only specific currencies but also the very stability of the international monetary system itself. If we proceed along this path, at whatever speed seems expedient and possible, we must in any event take care in the meantime not to apply restrictions which might prejudice the full utilization of any country's economic potential, and we must resist all temptations to unload our difficulties upon the shoulders of our neighbors. In our days, the interdependence of all economies—as exemplified

©International Monetary Fund. Not for Redistribution 108 SUMMARY PROCEEDINGS, 1962 plainly, though not always smoothly, by the degree of interna- tionalization of the money and credit markets—presents us with a challenge and a bright opportunity.

STATEMENT BY THE GOVERNOR FOR GREECE

Xenophon Zolotas

I welcome this opportunity of congratulating Mr. Jacobsson and the Executive Board and staff on the Annual Report, which testifies to their inexhaustible ability to improve on the already excellent standard of previous Reports. The past year was one of continued expansion and growing trade—although at a slower rate—largely among industrial coun- tries. On the other hand, the persistent price weakness of primary commodities rendered 1961 another year of difficulty for the less industrialized nations. As pointed out in the Annual Report, in recent years we have witnessed a marked divergence in trade developments. We should not lose sight of this vital issue on which depends the balanced and stable growth of the international economy. The efforts that developing nations must make in order to place their exports on a sound and broader basis cannot be fully effective unless the industrial countries facilitate the access to their markets and sustain an adequate flow of development capital on reasonable terms. Mr. Jacobsson has already emphasized the importance of close international cooperation in this field, in which little has been achieved. It cannot be overstressed that the Fund should provide full cooperation and support to any sound initiative in that direction. One of the most prominent and encouraging characteristics of the past year has been the progress made in the field of interna- tional monetary cooperation. In addition to its immediate benefits, such progress acquires a wider meaning if it is taken as a positive indication of our ability and willingness to respond promptly and effectively to the requirements arising from the increasing inter- dependence of our economies. It is only obvious that the basic

©International Monetary Fund. Not for Redistribution GOVERNOR FOR GREECE 109 triptych of economic policy goals, i.e., adequate growth rates, together with relative price stability and external equilibrium, cannot be achieved without effective coordination of financial policies. In recent years, several member countries have altered the basic parities of their currencies. Such realignments are often necessary and desirable for the establishment of realistic par values, providing a sound basis for the expansion of world trade and payments. The removal of fundamental disequilibria and the adoption and main- tenance of realistic par values are of primary importance for safe- guarding convertibility and multilateralism. In this respect, the recent record of both upward and downward adjustments in exchange rates is particularly encouraging as a sign of the sharing of responsibilities among surplus and deficit countries. It would be advisable, however, that the appropriateness of economic policy measures be appraised in the context of parallel developments and prospects in the rest of the world. Cost-price disparities, and the resulting trade surpluses or deficits, may easily be corrected or even reversed as a result of developments outside the country concerned. A typical example in this respect has been the case recently in the United States, where, following the faster rise of prices and costs in other major countries, any serious disparities in cost-price levels in comparison with the rest of the world do not appear to remain. The competitive strength of the American economy has improved without any drastic corrective measures, which in the light of the present course of events would have appeared unwarranted. The experience of the past year shows once again the crucial dependence of international monetary equilibrium on sound finan- cial policies on the domestic front. In view of the growing inter- dependence of our economies, the task of reconciling internal equilibrium with external balance becomes ever more pressing and significant. Disparity effects, highly detrimental to international transactions, could be avoided if better coordination were achieved in cost and price developments among the members of the inter- national community.

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Experience has shown that, while our arsenal of policy weapons is quite adequate to cope with demand-pull inflation, means of controlling the cost-push side of the problem have scarcely been developed and usually require too high a price in terms of unemployment margins. I believe that the cost inflation problem could be reduced drastically, if the various social groups were persuaded of the detrimental effects of remuneration increases unwarranted by productivity gains. Effective methods of informa- tion and persuasion are necessary to obtain general awareness of the fact that the inflationary spiral, in the last analysis, cannot be of benefit to anyone. Several countries have already started in this direction, but some coordination at the international level appears also desirable. The study of the problem undertaken by the Organization for Economic Cooperation and Development deserves, therefore, our warm support. Furthermore, it would be most useful if additional efforts were made in this context, with the cooperation of international labor organizations, in order to institu- tionalize our common stand against rising costs. Of special significance, as I mentioned before, is the relative stability of costs and prices in the United States in comparison to other major countries. The improvement in the competitive strength of the American economy has already been manifested in rising exports, sustaining the surplus of basic U.S. transactions with the rest of the world. It goes without saying that these important achievements would be further consolidated and world monetary order substantially strengthened by success in the efforts to ensure a high rate of noninflationary growth in the United States. Under these conditions and prospects, it would be quite absurd to speak of dollar overvaluation and speculate on the possibility of corre- sponding corrective action. The assurance of President Kennedy regarding the maintenance of the present parity of the dollar and the firm stand of our American colleagues on this matter deserve our highest apprecia- tion. Any different course of action would be unnecessary, undesir- able, and ineffective. As a matter of fact, it is hardly conceivable to have the par value of the dollar altered, without other currencies

©International Monetary Fund. Not for Redistribution GOVERNOR FOR GREECE 111 following suit. Thus, there would not be any significant change in relative prices and trading positions. Furthermore, it is very doubt- ful whether wholesale devaluations—tantamount to a rise in the price of gold—would help to alleviate the international liquidity problem. Irrespective of whether an increase in the price of gold is presently needed, there are serious objections against the arbitrary redistribution effects of the measure, which, in addition, would penalize those countries that confidently keep down the gold part of their reserves. Moreover, the rise in liquidity from the higher price of gold would most likely be offset by a corresponding shrinkage in the key currency component of world reserves, follow- ing the blow to their standing and to the state of confidence. The increase in the Fund's resources by borrowing and other measures of effective monetary cooperation, such as the coordinated intervention in the London gold market and short-term credit arrangements of the Basle type, have greatly contributed to the improvement of international monetary conditions. The basic question that has to be examined is whether there is still need to consider means and measures for the consolidation of the interna- tional monetary system. Taking into account the sound and effective policies pursued by the U.S. financial authorities, I have no doubt about the vigor of the American economy and the future of the dollar. The dollar has become the international currency that it is today on the basis of the strength and dynamism of the American economy and performs its key role in the best way possible under the present form of the gold exchange standard. Our present monetary system, however, cannot qualify as a genuine gold exchange standard and its actual working is apt to cause unneces- sarily heavy strains on the economy of the currency on which it is primarily pivoted. Such disturbances are, in turn, reflected in the whole pattern of international exchanges and payments. It is, there- fore, essential to make perfectly clear that the proposals I have made in the past go beyond temporary strains experienced by the key currencies to the core of the matter: the basic deficiencies of our present monetary system as a whole. The measures I have proposed since last year are not palliatives for the key currencies but basic conditions for the establishment of

©International Monetary Fund. Not for Redistribution 112 SUMMARY PROCEEDINGS, 1962 a stronger monetary order, i.e., of a genuine, multicurrency, gold exchange standard, the main features of which are the following: First, reciprocal accumulation of reserve balances among major trading countries in each other's currencies, with the reserve centers leading the way. Second, provision of a gold guarantee on foreign official reserve deposits by all major convertible currency countries. Third, preferential interest rate and tax treatment for foreign official depositors of reserve balances, which possibly could also be extended to private foreign holders of short-term assets. The above measures are complementary and not substitutes for each other, forming an integral policy device which should be implemented as a whole in order to be fully effective. Thus, while the gradual orientation of responsible authorities to the above policies is very encouraging, I would like to emphasize that in this case a piecemeal approach would be of dubious effectiveness. I do not intend to analyze in detail here, as I have done elsewhere, the specific functions that each of the above measures would perform. I would like to stress, however, that the over-all result would be the establishment of a multicurrency standard, in which the responsibility of supplying international liquidity and defending the stability of the system would be shared among several leading countries. The mutual piling up of deposits in major convertible currencies—through the appropriate utilization of surpluses and the reciprocal extension of credit—would not only serve as the first line of defense for key currencies and as a means to economize on gold, but would also establish a multilateral monetary infra- structure, made up of a network of interdependent reserve curren- cies which would meet both the short- and long-term aspects of the international monetary problem. In such a context, the simultaneous provision of the gold guarantee on foreign official reserve balances by all major trading countries would be indispensable. For it would be hardly possible otherwise to expect national monetary authorities to assume the responsibility of stockpiling each other's currencies. The strength- ening of confidence to this end appears necessary not only with

©International Monetary Fund. Not for Redistribution GOVERNOR FOR GREECE 113 respect to the present reserve currencies, but also and mainly with respect to those currencies that appear eligible to perform a key role in international transactions. On the other hand, as I have emphasized in several instances, if one reserve center were to adopt the measure alone, its efficacy would be limited. The gold guarantee, as I have proposed it, is an integral part of the above system of complementary measures, which would reduce our dependence on gold as a means of international payments while maintaining it as the measure of value. As a matter of fact, it would hardly be necessary to bother about gold in the context of the above system, which would render a number of major currencies perfect substi- tutes for gold. Since the main responsibility of central banks, which determines the structure of their international assets, is to secure the gold value of their foreign exchange reserves, they should scarcely have a reason to prefer gold to interest-bearing holdings of guaranteed key currencies. On the other hand, the provision of a multilateral gold guarantee would presently be the best answer to gold speculation and would definitely silence disturbing rumors and disequilibrating activities that exist in this respect. For the provision of the guarantee would serve as an indisputable proof of our firm commitment to maintain the present price of gold. The current pressure on present reserve centers, due to the excessive recourse to their capital markets by the rest of the world, would be largely alleviated by the raising of several major currencies to the status of international monetary media. At the same time, the proposed differentiation of interest rate and tax policies between the internal and external sectors would allow the existing and eventual reserve centers to secure the independence of their inter- national position from internal policy requirements and render the goal of external balance compatible with domestic high-employment equilibrium and increased rates of growth. It goes without saying that the regular coordination of interest rate policies among the financial centers of the world would be absolutely essential. With the above system of interconnected policy measures, we need neither transcend our present institutional framework nor limit our national responsibilities for discipline in order to cope

©International Monetary Fund. Not for Redistribution 114 SUMMARY PROCEEDINGS, 1962 effectively with the short- and long-run deficiencies of our present monetary system. We should not lose sight of its basic weaknesses as a result of recent improvements in the international monetary situation. On the contrary, it would be most timely and appropriate to undertake reformative action when it appears to be less urgently required, rather than postpone it till the time of crisis, when it would be overdue and the least effective. In the long run, there is always the well-known question mark on the ability of the present gold exchange standard to satisfy the liquidity requirements of free and growing world transactions. At present, the problem appears anything but urgent; conditions, however, may change rapidly in case of real or imaginary dangers causing a shrinkage in the foreign exchange component of world reserves, through the interplay of confidence and speculation effects. In a world of high political tensions and uncertain developments, both effects depend on volatile psychological factors and are bound to feed back on rumors. In view of the recurving character of the speculation and confidence effects, it would be unwise to overlook the necessity for reinforcing our defenses against such unsettling occurrences. Furthermore, a liquidity shortage may become evident faster than we think, if only because the reserve centers are too successful in restoring an over-all surplus in their balance of payments. Reconciling, therefore, the stability requirements of the gold exchange standard with the liquidity needs of the international economy would be one of the serious future problems. It is only natural that a multicurrency gold exchange standard would be the effective and feasible answer to the threefold issue of liquidity adequacy, speculation effect, and confidence effect, since it has been designed in response to them. The proposed multilateral monetary infrastructure would provide an adequate and sound basis for the expansion of international liquidity, while the confidence and speculation effects would be minimized by the simultaneous provision of the gold guarantee and the coordinated manipulation of interest rate and tax policies. The implementation of the proposed system should be a matter of international consultations and agreement, among the major

©International Monetary Fund. Not for Redistribution GOVERNOR FOR GREECE 115 trading countries, in which the role of the Fund would be of primary importance. In addition to the various ways in which the Fund could contribute to this end, the fact that the gold guarantee is an established practice in its transactions could probably provide a way out of the psychological barrier that appears to exist in this respect. Thus, it might prove useful that the gold guarantee be extended only on reserve deposits made either through the Fund at the reserve centers, or with the Fund itself. In both instances, the process would be completely voluntary for the countries concerned and the Fund would keep this type of activity outside the quota system. It goes without saying that the reserve balances deposited through or with the Fund would be as freely usable and transferable as ordinary reserve deposits. It may be more expedient if, in the initial stage, the Fund limits itself to the role of an agent of depositor countries, following their instructions as to the form of their reserve deposits and the curren- cies in which they would like to hold them. I believe that in this direction lies a valuable opportunity for the Fund to improve on its outstanding record of contributions to international monetary order. It should be emphasized again, however, that neither a multi- currency gold exchange standard, nor any international monetary system for that matter, would be fully effective in maintaining over-all equilibrium in world transactions, unless appropriate action is taken to support the balance of payments position of primary producing countries and to promote rapid economic growth in developing nations. Continued expansion of world trade, as well as the stability of our monetary order, will, in the final analysis, depend on the ability and willingness of major industrial countries to run deficits on capital account on a sufficient scale to sustain an adequate rate of growth in the countries in process of develop- ment. A reinforced gold exchange standard with an expanded monetary infrastructure would greatly enhance the ability of the developed countries of the Western world to meet these fundamental requirements of international economic order and growth. Before I conclude, I would like to express our deep appreciation to the retiring Deputy Managing Director of the Fund, Mr. Cochran.

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With his outstanding qualities, he has rendered excellent services to the Fund and all member countries, and we shall miss him. We wish him all the best. I would like to take this opportunity to extend our warm con- gratulations to the new Deputy Managing Director, Mr. Southard, whose exceptional ability and experience provide a guarantee for the successful continuation of his position in the Fund.

STATEMENT BY THE GOVERNOR FOR THE NETHERLANDS

M. W. Holtrop

Though it certainly was a great pleasure last year to convene in the gay atmosphere of Vienna, I must admit that I felt happy this year to return to Washington to a meeting that promised less excitement, but also fewer worries, than did our previous gathering. Last year, we found it necessary, in the light of recent experience, to discuss the strengthening of the Fund's resources, so as to enable it to better take care of possible emergencies. Now we meet with the double reassurance that the $6 billion of borrowing arrange- ments are almost completed and that the trend in international payments relations clearly moves in the direction of smaller surpluses and smaller deficits. As far as my own country is concerned, I may observe that the mixed blessing of ample surplus has by now given way to the comfort of moving around equilibrium. As for the European continent generally, one need only remember that in the years 1959 to 1961 the net increase in official reserves of the six EEC countries and the net loss of reserves of the United States both amounted to more than $6 billion, while in the first six months of this year the net increase in reserves of the Six consisted of a mere $125 million, to be aware of the change in atmosphere. It is true that this movement toward equilibrium in the balance of the Six is not matched by quite as large an improvement in the balance of payments of the United States, but is partly reflected in improve- ments in the position of the United Kingdom and other countries.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR NETHERLANDS 117 Though there is, therefore, no reason yet for complacency, the over-all improvement of the payments situation seems to me undeniable. This movement toward equilibrium is the result of twofold forces: on the one hand, of direct interventions by the governments, as, for example, the tying of aid and special arrangements with respect to military expenditure by the United States and the prepayment of debt by European governments, but on the other hand, also of more fundamental adaptations, namely, a quite noteworthy stabilization of labor cost per unit in the United States and a somewhat grudgingly accepted, but hi the circumstances unavoidable, increase in this same cost-item on the European continent. Thus, market forces and policy measures, slowly but irresistibly, are working toward equilibrium. Given the reserve situation of the countries involved in these major movements and considering the available resources in the IMF, there is, in my opinion, no reason to get unnerved by the fact that this process of adaptation, before having reached the equi- librium point, will, for the time being, continue to bring some further loss of reserves to the United States. Provided the policies followed by the governments on both sides of the ocean continue to be directed to re-establishing equilibrium, there is no doubt that that goal will be reached long before available reserves should prove to be deficient. But, of course, it is policies that will continue to count. When reading occasionally some of the more critical comments on current developments, one gets rather the impression that the authors could not be satisfied with anything less than a "foolproof" international payments system, a system that would guarantee that considerations of external equilibrium would never have to interfere with the pursuit of national policy goals. I would like to express the hope that I shall not live to see the day that such a system were introduced. For clearly a foolproof system could well dispense with the services of most of us, and it would just be sad to see this august gathering thus become technologically unemployed.

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I do not think, however, that we really have to worry. The fact of the matter is that it is of the essence of an international payments system, based on fixed rates of exchange, that it should not be proof against faulty management, but should force us continually to be on the alert to pursue policies conducive to both internal and external equilibrium. It is this conviction that leads me to express my support for the stand taken by Mr. Jacobsson, in his opening address, against any idea of altering the present price of gold, or of introducing a system of extensive gold guarantees, by which I mean a system of gold guarantees of a not strictly qualified character. No matter what the intentions of the authors of such proposals for radical reform may be, such reforms would actually result in relieving monetary authorities for an indeterminate period of time from the discipline of the balance of payments. And I can think of no development that would be more harmful to the true interests of both national and international monetary stability than to create that condition. I, therefore, want to state my firm conviction that no radical reform of our payments system is presently needed. What we are in need of are national policies that are conducive to international equilibrium. Such policies should be pursued by both deficit coun- tries and surplus countries with courage and consistency, and with the willingness to make some sacrifices for that purpose in the field of whatever national policy aims might be dear to them, be it the protection of specific industrial or agricultural interests, the stability of their cost of living, or the height of their interest rates. Meanwhile, we certainly should not fail to continue, in the framework of all bodies that are dedicated to international mone- tary cooperation, and also therefore in the framework of the International Monetary Fund, the study of improved techniques of cooperation and coordination in the field of monetary manage- ment, so as ever better to realize that threefold goal of all our endeavors in this field, namely, the establishment and maintenance of conditions conducive to international equilibrium, to general price stability, and to satisfactory growth.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR ARGENTINA 119 In conclusion, I should like to join my fellow Governors in paying tribute to Mr. Cochran, who, since early 1953, has been the wheel within wheels of this complicated monetary machinery, and who has been responsible, in this important phase of the Fund's history, for its smooth functioning. I also wish to associate myself with the appreciation and thanks expressed by earlier speakers to Mr. Southard, whom we have known, since February 1949, as one of the most active members of the Executive Board, and who now has been courageous enough to change his role and will serve the Fund, which he already knows as few of us do, in the capacity of Deputy Managing Director.

STATEMENT BY THE GOVERNOR FOR ARGENTINA

Alvaro C. Alsogaray

It is for me a high honor to speak again from this tribune of the International Monetary Fund and the World Bank. I think that every one of us has the obligation at this meeting to try to make a contribution to the task being carried out by these two institutions, whose prestige is growing day by day throughout the world. In my particular case, the only way to try to make such a contribution is to refer to concrete experiences which we have had and are still having in Argentina. If these experiences are added to those of other countries, we will obtain an ever more important over-all picture from which it will be possible later to formulate more general rules and conclusions that will perfect our techniques and help us build an increasingly efficient modus operand!. I do not try to interest everybody in the details of the Argentine problem; fundamentally, we Argentines have to solve this problem ourselves. I merely wish to outline, with the aims already men- tioned, the two or three outstanding points of our experience. And these I take the liberty of submitting to this meeting for consideration.

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Nothing is more dangerous than the misuse sometimes made, out of inability or for demagogical reasons, of such terms as recession, expansion, stability, development, and others. I believe that nobody with an awareness of his responsibilities and a social sense can now believe that economic recession is a solution for any problem. In some countries there may be very small minorities who believe that recession is the way to maintain some of the privileges they enjoyed in the past. But those groups have fewer and fewer opportunities of prevailing and, in any case, within the general picture, they are not an important negative factor. Everybody denies them, and there is no danger at all that they may predominate. But, without ignoring them, there is the need to seek also in other factors and other sectors the deeper causes of the Latin American problems, and, in general, the problems of all countries trying to speed up their development. The idea of economic expansion and development does not require much comment. Contrary to what happens with recession, everybody is agreed on the need for economic expansion and the acceleration of development. The question is how to face this task, how to determine which are the best methods for carrying it out and for establishing the basic conditions for these objectives to be attained. And this is, indeed, a question on which not all of us are in agreement, and about which from time to time there are violent polemics, ideological fights, and—what is even worse— dangerous experiments. In Argentina we have lived recently through an experiment of this kind. Even today we are discussing the results of such a test, and there are many who still do not want to recognize the truth about it. I would like to make a very brief comment on this experiment, as I mentioned at the start. Improvident men and ideologists who, incidentally, wielded a great clandestine political influence, posed to us the false dilemma of stability versus development. In April 1961, when, under the direction of the Minister now speaking, we had achieved a firm monetary stability, on the basis of which a perhaps excessive

©International Monetary Fund. Not for Redistribution GOVERNOR FOR ARGENTINA 121 expansion and development were being materialized, the continuity of the process was broken with the argument that we were accomplishing "too much stability and too little development." A few months later, under the impulse given by the Government itself, and many businessmen favoring inflation and controlled development, from which they always reap advantages, Argentina started an unbridled race toward adventure and a heedless over- investment, which was justified and introduced under the label of "development policy." The results are now evident. On very few occasions such as this is it possible to determine with such precision the causes and the errors of a process or a failure. That is why it should be analyzed. Development at all costs, development planned by improvident or ideological technicians, development which dismissed a stable monetary basis and a genuine financing, soon ended in a new monetary devaluation, in a new inflationary impulse, in a new increase in the cost of living, in a financial crisis, and also, finally, in what its defenders would have least desired: the hard obligation and the absolute need, imposed by the facts themselves, of admitting the impossibility of continuing with that supposed rate of development. We have now before us the task of stabilizing our currency, of rebuilding the reserves in the Central Bank, of solving a financial crisis, and of starting afresh on the road toward authentic development. This experience is another evidence of what is well known to all of you: there can be no development or sound expansion in any economy or country except on the basis of monetary stability and political stability, and with a wise economic and financial policy, which must also be stable over a certain period and should not be changed practically every year. The term "stability" does not mean stabilization of the economy or, as some disdainfully charge, "stabilization of misery." The word "stability," in its technical economic sense, means political stability, stability of economic and financial plans, and, fundamentally, monetary stability. The contraposition of "stability" versus "development" is false. No development is possible except on the basis of stability as we have defined it. Development with inflation is a pseudoscientific

©International Monetary Fund. Not for Redistribution 122 SUMMARY PROCEEDINGS, 1962 myth invented by theoretical planners, and applied by demagogues or politicians who choose the way of the least effort. Controlled inflation is another modern nonsense which it would not be worthwhile to discuss scientifically, were it not for the tremendous harm it causes sometimes when, as frequently happens, there are politicians ready to apply it as an easy solution. The alleged incompatibility and opposition between stability and development, on the other hand, mean something more than a contraposition between two concepts or two theories. They mean two different manners, different even in their ethical and moral foundations, of facing practical problems in the social field. There is a need for courage and decision and absolute lack of self-interest to solve stability problems. There is, in addition, the need to be honest with oneself and with the social groups toward which the action is directed. And this, in many cases, is difficult to face. On the other hand, in order to follow the easy road of inflation, false development, and fantasies it is only necessary to forsake some moral prerequisites and be carried along by the human pressures of great sectors of society who live in precarious condi- tions and who demand immediate solutions that require no great effort. Argentina has just experienced this problem, and knows it well. It knows how to distinguish between development and fantasy. And it is now determined to follow again the road to stability as the only possible solution for the problem of achieving an authentic and durable development. Argentina is not solving its problems on the basis of classical recession and decrease of the national effort. It is deliberately going through the hard period of reaching stability in order later to carry out a bold and energetic development policy. Few things about the problems of stability and development have impressed me more in recent times than the clear warning given recently by Mr. Per Jacobsson about the danger of recession and the need for adequate international financing and cooperation to make it possible to defend stability and at the same time promote development.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR ARGENTINA 123 My own experience leads me to coincide fully with this point of view, and, if I could add anything, it would be simply to reaffirm emphatically what has been said by Mr. Jacobsson. In this I also want to keep to the method I mentioned at the start: to point out concretely one key point and one experience. At the present time, in the international financial field and, in many cases, even among the political leaders responsible for the conduct of the Western world, there is no clear appreciation of the need and the real urgency of many countries of counting on a timely foreign help to halt inflation, attain stability, and thereby promote development. It is true that the International Monetary Fund and the World Bank work with commendable efficiency toward the solution of certain specific problems of monetary stability and development projects. In these spheres the action of both institutions has an immeasurable value. But there are no national or international institutions prepared to help solve the problem of the critical moment of halting inflation and the transition to stability. As a general rule, during this critical period, problems of two types are posed. Some of them, such as the exchange system, the need to face the rise in the cost of living, credit restrictions, limita- tion of salary increases, etc., can be solved overnight and depend only upon the will and the courage of the political leaders facing up to them. But there are other problems, such as eliminating budget deficits, efficient reorganization or conversion to private enterprise of big State enterprises or services, the completion of public works already started, etc., all of which require time and financial resources. And for this, nobody is ready to lend any help. On the contrary, the opposite tack is taken. The executives in charge of braking inflation and restoring order in their countries are told: You must balance the budget, reorganize enterprises, achieve a greater efficiency, and then we will aid you. The execu- tives are thus given an impossible task, and, besides, are offered something useless which may mean a true irony. Because, what would help and cooperation be needed for, once the problems are solved? How can such problems be solved without that

©International Monetary Fund. Not for Redistribution 124 SUMMARY PROCEEDINGS, 1962 cooperation? At the bottom of all this there is obviously a question of trust and a question of skepticism in view of previous failures. "What is going to be done" is not believed in. Besides, there is the desire to be sure that the resources and the aid will be well used. And then a dangerous generalization is made: the conscien- tious and responsible statesman is treated on the same level as the demagogue; the same treatment is given to a country that deliber- ately and successively is managed through inflationary measures and believes foreign aid is an obligation, and to a country that deems that this aid is an emergency question and is tending toward stabilization; the same treatment is given to leaders who are ready to require their peoples to make their own effort in order not to have to resort systematically to foreign help, and to those who promote chaotic conditions so as to demand that help later under the threat that if they do not get it they will ask the communists for it. And this, obviously, does not stimulate the effort of responsible people. I think that one of the most urgent, most pressing tasks at the present moment is to discuss this problem of overcoming the critical moment between inflation and stability, and to find a method to make the cooperation required for this possible and opportune. I want to emphasize in this respect that since March 1961 we have been analyzing this important question with the Secretary of the Treasury, Mr. Dillon, and that, for the case of Argentina, I have found in him the utmost understanding, besides the will of breaking up old methods and of doing something effective and practical to solve problems which exist today and in these circumstances, and which are not for tomorrow or for other conditions. Also, the officials from the Fund who recently have analyzed with us in Argentina this interesting subject of transition from the inflationary period to that of stability have cooperated in the same way. The World Bank has also made an important contribution to Argentina in this matter. But I believe that this type of cooperation requires a special basic consideration which would allow it to func- tion at the right time and when it is really needed.

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There is one final consideration of a more general nature, the relationship which naturally exists between foreign cooperation and the political, economic, and social bases of the country which is the recipient of such aid. It is erroneous to believe that it is enough to pour enormous capital or resources into a specific country in order to bring about authentic development promotion and neutralize the danger of political unrest and communist penetration. More important than the amount of these resources is the manner in which they will be utilized. Foreign cooperation can only serve as a stimulating factor added to individual effort brought about by an adequate economic and social philosophy. The latter requires, on the one hand, political stability, and on the other, an effective means of carrying it out. Only by means of effective political economic action of this type can we guarantee the adequate use of resources and set up effective safeguards against the advance of totalitarianism. For this reason it is as important to cooperate with those who follow this road as it is not to cooperate with those who maintain that it is possible to embark on totalitarian adventures or demagogic schemes with resources obtained from abroad. The granting of the latter merely means the financing of failures. International financial capital and cooperation are significant, but what is really important is the creation of a national conscience which will lead to politically stable governments, with free econo- mies, monetary stability, and authentic development, based on individual effort.

STATEMENT BY THE GOVERNOR FOR TUNISIA

Hedi Nouira

The Report of the IMF, as in previous years, can but confirm the difficult situation of the underdeveloped countries. The prices of primary products for the whole of the year 1961 were, on the average, 4 per cent lower than in 1960, or 2 per cent,

©International Monetary Fund. Not for Redistribution 126 SUMMARY PROCEEDINGS, 1962 if year-end levels are compared. Since there was a drop of 6 per cent in each of the two preceding years, it is evident that the problem is constant and acute. During the same period, the prices of the manufactured products purchased by the underdeveloped countries continued to increase: 1 per cent last year, after even larger increases. The terms of trade of the underdeveloped countries thus continue to deteriorate. A recent study published by the French Institute of Statistics and Economic Research showed that from 1950 to 1961 this deterioration amounted to 11 per cent, while in the same period the terms of trade of the industrialized countries improved by 8 per cent. This situation is worsened by another factor: the expansion of international trade favors the industrialized countries. In 1954, the underdeveloped countries accounted for 28.5 per cent of world imports and 28.7 per cent of world exports; in 1961, these propor- tions had fallen to 24.4 per cent and 23.5 per cent, respectively. The detrimental effect of this development is twofold: On the one hand, the percentages have declined, and, on the other, the per- centage of exports has fallen below that of imports. This is brought out in another way in the Fund's Report, which shows that the intensification of world trade since the 1958 recession arises essentially from the trade between industrialized countries, which has increased by nearly 50 per cent since 1958, whereas purchases by those countries from the primary producing nations have increased by only 15 per cent. It should be noted, moreover, that the underdeveloped countries are not the only primary producers. In addition, the introduction of substitute products and the establishment of protective agricultural policies by the industrialized countries usually have an adverse effect on the underdeveloped countries. In practice, instability of the commodity markets affects the underdeveloped countries' prospects of development. A country's industrialization and the execution of basic projects on a schedule

©International Monetary Fund. Not for Redistribution GOVERNOR FOR TUNISIA 127 fixed by plan, which require years of constant effort, are continually jeopardized by the instability of the funds that should make them possible. This serious imbalance is one of the fundamental difficul- ties of development for the young countries that tend to attach more and more importance to short-term problems; long-term development depends, in the end, on the solution of these problems. The long-term trend of the terms of trade between manufactured products and primary products is not therefore of basic importance to the underdeveloped countries. The latter certainly cannot believe that the multiplication of substitute products is an abnormal factor or that the industrialized countries must forever assist in maintaining the structural rigidities of the underdeveloped countries. Such countries should take a realistic view of their situation and think over their structure over the long term. It is then impossible to defend any resistance to change; on the contrary, it is necessary to adapt to the hard realities of economic life. For such an adaptation to be possible, however, solution of the short-term difficulties must not clash with long-term objectives. There is such a clash, however, for, in order to develop in an orderly fashion, the underdeveloped countries must be able to have regular revenues. Here, again, they are faced at one and the same time with the problem of the terms of trade and the problem of instability of exports. The Monetary Fund, of course, has long been concerned with the position of the underdeveloped countries, to which it gives its support to help offset the variability of their foreign revenues, on condition, of course, that there are reasonable certainties of a resumption of exports or a slackening of imports. That, however, is only a very small part of the solution. The United Nations has also considered the problem. Particular mention should be made of the Crawford report. This report proposes two plans intended to protect the producing countries against any reduction in their revenues from exports below a movable average of receipts of previous years. The two plans differ

©International Monetary Fund. Not for Redistribution 128 SUMMARY PROCEEDINGS, 1962 only in the manner of coverage: in the one case it is insurance; in the other, the countries concerned would acquire drawing rights. While hoping that the first plan may become a reality, it would be more realistic to attempt to use the second, which involves drawing rights. The reluctance of the authors of the Crawford report to entrust the management of such a system of drawing rights to the Fund is debatable. It is far easier to turn to an existing institution, with its established charter, staff, and policies, than to create a new agency out of thin air. Moreover, this falls exactly within the province of the IMF. The Fund's participation, moreover, would answer what some may regard as a basic objection, namely, the matter of automatic compensatory financing. This automatic action in no way guarantees that the funds obtained will be used within the framework of a plan of organization or reorganization of the economy of the beneficiary countries. The assistance of the IMF usually entails a study of the economic situation and the economic policy of the applicant countries. The vulnerability of the balance of payments position of the under- developed countries, moreover, is part of the problem of inter- national liquidity and this is always under observation. The "Ten-Nation Agreement" has of course come about since our last meeting, and it should help to solve future difficulties of reserve currencies through support and collaboration among the industrialized countries. The underdeveloped countries are not unappreciative of the measures intended to help the reserve currency countries to perform their duties. This, however, should not cause the problems of the under- developed countries to be lost sight of or relegated to the back- ground. Under the aegis of the International Monetary Fund, the industrialized countries have been able to agree to come to the aid of whichever currency might be in difficulties. Would it not be advisable for the Monetary Fund to consider, without delay, another parallel agreement whereby these same industrialized countries would declare their willingness to place at the Fund's disposal for the underdeveloped countries compensatory funds that will make

©International Monetary Fund. Not for Redistribution GOVERNOR FOR ISRAEL 129 it possible to grant drawing rights as suggested by the Crawford committee? The work of the United Nations has already cleared the way, so that it should not be difficult to draw up the measures to implement the proposal. It might even be preferable, in order to avoid the reproach that the "Ten-Nation Agreement" is discrimina- tory, to extend and complete the Agreement in this way, so that it will answer the needs of both the industrialized and the under- developed countries at the same time. May I now associate myself with the warm and friendly words addressed to Mr. Cochran, who is an old friend of Tunisia, and it is therefore with deep regret and not without great emotion that we now see his withdrawal from the Fund to which he has devoted so much of his energy and intelligence. To his successor, Mr. Southard, whose value is unanimously recognized, we would like to wish full success in his new and important function.

STATEMENT BY THE GOVERNOR FOR ISRAEL

Levi Eshkol

During the past year's operation, the Fund's position as leader and guide in the world monetary exchange system has been enhanced and fortified. It is generally felt that the economic situation and prospects are at present brighter than a year ago. This is mainly the result of the improvement in the economic situation of the major countries. I should like to devote my remarks to economic development in one small country. Among the nations which have advanced toward the consolidation of their economic systems, Israel may be included. On February 9, 1962 Israel carried out a reform in its economic policy. The system of multiple rates based on !<£ 1.80 to the dollar, plus premiums for exports and certain capital transfers, which had developed as a result of the dynamic nature of our development

©International Monetary Fund. Not for Redistribution 130 SUMMARY PROCEEDINGS, 1962 and immigration, was replaced by the introduction of a new unified rate of I£3 to the dollar. The reform of our monetary system was carried out under particularly difficult conditions. In most other cases, such reforms are made while currency reserves are declining, or when there is a danger of such a decline. In Israel, for the past few years, there has been a marked increase in the exchange reserves: from export earnings, private and public capital transfers, including personal restitution from West Germany. When we planned the reform, we anticipated that the new exchange rate would further increase the flow of capital and, therefore, also the rate of increase of our currency reserves. We recognized that this additional inflow, as well as the higher rate in terms of Israeli pounds per dollar, could generate strong inflationary pressures. Another factor, which made the reform particularly difficult, was the increase in the rate of immigration to Israel, which necessitated a considerable rise in government expenditure to provide services, as well as more investments in housing and productive enterprises. I would also like to point out that the share of foreign trade in the total resources of the economy is, in Israel, as in a number of other small countries, particularly high. For this reason, the devaluation was liable to have a proportionately stronger effect on our economy than in other countries, where foreign trade has a smaller share. Devaluation was but one point—perhaps the most important— in the introduction of the economic reform which was announced last February. In addition, the Government adopted a number of stabilization measures. One of the major points was to limit gradu- ally the protection of local industries by eliminating import restrictions. The Government also decided to adopt several measures in the field of monetary, fiscal, and income policies, in order to check inflationary pressures, We enabled holders of government mortgages to repay before maturity, allowing special discounts. We followed

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a policy of attractive interest rates on short-term as well as on long-term government borrowing. We introduced a compulsory loan at a rate of 12 per cent of the individual income tax payments and added to that a compulsory saving scheme. All of these measures are directed to prevent an inflationary pressure on the economy. I am rather pleased to point out that we were able to avoid requesting the financial support of the Fund in the form of drawings or stand-by arrangements. Fortunately, the state of our exchange reserves enabled us to rely merely on the moral support of the Fund, which was readily given to us after detailed advance consultations. About seven months have passed since the adoption of these reforms hi Israel. This is undoubtedly too short a period to enable us to evaluate their full effect. However, we can already sum up developments in a few areas. First, the economy continued to grow at a rapid rate. We expect that in 1962 our national product in real terms will increase by 10 per cent or more over last year. We have been able to maintain full employment. Exports grew at a desirable rate, while the rate of increase of imports was slower than in the past. This is especially satisfactory viewed against the background of an increased immi- gration, which generally tends to decrease exports and increase imports. There was a marked rise in the capital imports from various sources. Foreign currency reserves increased substantially since the adoption of the new policy, and are now reaching a level which is today considered a minimum for a country which has a high import propensity in its economy and a high level of foreign debt. The establishment of the new exchange rate has necessarily been accompanied by a rise in prices. Fortunately, the price rises have not been excessive, and total about 5 per cent, of which about 3 per cent only may be attributed to the effects of devaluation. This rise corresponds to the projection we had worked out. Thanks to the cooperation of wide sectors of our population, workers, and management, and the general increase in productivity, we were able to avoid much greater price rises. . . .

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We know that there are still many difficulties ahead. We are sure that with the same positive attitude of workers and manage- ment we will be able to maintain the present exchange rate, keeping our economy fully employed and increasing its national product. In concluding my remarks, I should like to express my warm and sincere gratitude for the close cooperation of the management and staff of the Fund, and the hopes that our relationship will continue on this basis in the future. May I also take this opportunity to take regretful leave of Mr. Cochran, and to extend a cordial welcome to Mr. Southard.

STATEMENT BY THE GOVERNOR FOR PERU

Enrique Bellido

I wish first of all to join in the congratulations being expressed to Messrs. Jacobsson and Cochran and the members of the staff on the contents and presentation of the Annual Report now under consideration. I feel that it is particularly important to mention the part of the Report on the policies of the Fund with regard to financial stability, and the way in which it has cooperated with member countries in supporting realistic exchange rates and maintaining strength and confidence in the monetary system. The authorities of my country have endeavored at all times to follow sound monetary and exchange policies, considering that currency stability, particularly in the economically less developed countries, is the best way to achieve high levels of real income and employment and encourage development of productive resources. Through strict fulfillment of the agreed stabilization programs, it has been possible to maintain the value of the currency and balance of payments equilibrium, and at the same time to record a substantial increase in the output of goods and services and the volume of trade. As a result of these policies, it has also been possible to eliminate the certificate system, which involved differential exchange rates,

©International Monetary Fund. Not for Redistribution GOVERNOR FOR PERU 133 and to terminate the only bilateral payments agreement still in effect, and at the same time to assume the obligations under Article VIII of the Fund Agreement, which decision was undeniably a clear expression of Peru's firm determination to keep the national currency strong and convertible. When in mid-July of this year—mainly as a result of psycho- logical reasons derived from internal factors—the exchange market was subjected to strong pressure which was reflected in a temporary loss of reserves by the Central Bank and in liquidity difficulties for the banking system, a statement by the Government of my country on its firm determination not to resort to direct controls or to return to the certificate system, and to maintain currency stability by all the means at its disposal, was enough to restore confidence and more than recover the foreign exchange which had been lost in the emergency. This experience has conclusively established the validity of strictly technical solutions for meeting occasional financial difficulties.

At the same time, measures were taken toward a readjustment of the liquidity of the banking system, and special attention was also given to the fiscal problem, a favorable solution of which is expected to be reached in the remainder of the year. Although Peru, like other Latin American countries, is feeling the impact of the drop in prices and finding difficulties in marketing many of its exportable products, the increase and diversification of production and the development of new export lines are providing it with an increasing supply of foreign exchange, which is enabling it to cover its increased demand for imports and service payments. The immediate outlook for the Peruvian economy is therefore encouraging, and it gives me satisfaction to state that there is now general awareness in my country that it is essential, in order to achieve orderly and increasing development, to continue to fulfill the basic principle of maintaining monetary stability under the provisions of Article VIII of the Articles of Agreement of the International Monetary Fund.

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It gives ine particular pleasure to express our thanks to the Monetary Fund authorities for the full support they have always accorded us.

STATEMENT BY THE GOVERNOR FOR SPAIN

Alberto Ullastres

The year that has elapsed since our meeting in Vienna has witnessed considerable advances in all transactions of the Fund. This is emphasized in the Report of the Executive Directors and Mr. Jacobsson's speech of Monday. Concerning Spain, whose stabilization program receives so much attention in the Annual Report, we have shown a strengthening of the trend toward greater integration of our economy with that of the countries of the free world. As evidence of this, it can be stated that the liberalization of foreign trade has reached up to 70 per cent of our total volume of imports. The area to which this liberalization applies has also been extended. Not less important are the advances shown in the liberalization of current invisibles and capital transfers, both fields in which Spain is today in line with most of the European countries. The new regulations referred to are especially pertinent in the case of foreign capital investment. The peseta has been quoted at all times in the international markets within the limits of the agreed par value, and the prevailing situation of the Spanish economy has determined the decision of the Spanish Government to request negotiations for our eventual membership in the Common Market. In spite of the evolution of our liberalization policy at a perhaps unprecedented speed in the history of the postwar world—it should not be forgotten that in July 1959 all our foreign trade was carried on a bilateral basis and absolutely no payments could be made without special authorization in each particular case—the Spanish reserves have increased up to a figure of $1,038 million on September 1.

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Such a pace in the growth of foreign reserves, as well as their gold percentage—$429 million, equivalent to 41.3 per cent—has given grounds for criticism both in Spain and abroad. Regarding the total figure, I must repeat what I have already said on other occasions: our trade deficit, the imminent initiation of a development program, and the fluctuations of an economy which is still predominantly agricultural, explain the aforementioned level of reserves. As to the gold percentage, we are also within a prudent range, whether we examine our case—with a national income and a foreign trade so much higher than in 1936, we maintain reserves and a gold percentage lower than at that time—or if we compare it with that of other member countries. The growth ratio recorded in a period of three years should not impress anyone, since Spain started practically at zero. As a result of all this, the Spanish economy is ready to launch a strong drive for economic expansion, and the Government is also determined to pursue its policy of liberalization. Our country is, therefore, in a position to play an active role within the monetary system of the free world, and to contribute efficiently, within its possibilities, to the general stability. It is fitting to express again our appreciation to those that made possible, together with the efforts of the people of Spain, the satisfactory reality of today. This includes the International Monetary Fund, the OECD, the United States Government, and the commercial banks of the United States.

STATEMENT BY THE GOVERNOR FOR TANGANYIKA

Paul Bomani

It is a matter of great pride and satisfaction to me that I can come here and speak today for Tanganyika as one of the newest members of the Fund and the Bank. I am very conscious of the honor thus done to my country, and I am also deeply grateful for

©International Monetary Fund. Not for Redistribution 136 SUMMARY PROCEEDINGS, 1962 the good wishes and warm welcome extended to me both formally and informally. May I also take this opportunity of acknowledging the help we have received, in the process of admission, from the staff of the Fund and the Bank; without it, Tanganyika would not have been able to take her place as a full member on this important occasion. Tanganyika became of age last December when it achieved its independence, and the opportunity we now have to participate in these great international financial institutions is witness of our newly won stature. Let me assure you that we shall do all we can to uphold the aims and practices which have been evolved so successfully over the years. We shall endeavor to play our part and to make our contribution, small though it may be, in these discussions of our common problems. We are well aware that the main responsibility for overcoming our difficulties rests on our own shoulders; but Tanganyika, as I will explain in a minute, has learned the realities of interdependence, and it is for this reason and in this spirit that we are taking our place here today. Tanganyika is one of the new generation of countries, mainly from Africa, setting out on the road of nationhood. Many of us are starting this journey poorly equipped and with many of the foundations for economic growth incomplete and even barely started. We have limited financial resources of our own, yet the needs of our people are enormous and their standard of living is appallingly low. For example, the annual per capita monetary income in Tanganyika is no more than £ 13, or $37. The question of economic development is the concern of every country repre- sented here today, but for the newly emergent countries like my own, it is much more than that; it is a matter of the direst urgency and necessity. During the past year, we have been grappling with the problems of financing and development; and we have come to realize very quickly that the approach adopted on several vital issues by various countries and institutions from whom we are seeking aid has been conditioned by circumstances and considerations which have little relevance to our own position. We were advised by a Bank survey

©International Monetary Fund. Not for Redistribution GOVERNOR FOR TANGANYIKA 137 mission to concentrate on those projects which would bring a quick return, which in nearly every case involves a preponderance of local expenditure; yet we find when we seek aid that it is all too frequently tied to external costs only, and the implication is that we should abandon our carefully considered priorities in favor of larger, more grandiose, but less valuable schemes which do not touch our real needs but suit the established rules of the game. It seems to me that there is a strong call for a fresh approach to meet the circumstances of countries in the very earliest stages of development, such as apply to my own. The problems may be old and familiar, but, if I may say so, what is required is that they be looked at in a different perspective. In his address, Mr. Per Jacobsson stressed the interests of economic and monetary cooperation among countries that have historically belonged to the same currency and trading area. Tanganyika is well aware of the value of this advice, because for some 40 years Tanganyika has been part of a Common Market in East Africa, along with our partners, Kenya and Uganda, who, we hope, will not be long in joining us here. We share a common tariff, and several of our important economic services are operated on a common basis; there is freedom of movement for goods and persons between the different countries; and, generally speaking, our fiscal and economic policies are similar and the subject of regular mutual consultation. Another important feature of the East African Common Market is that we share a common currency, which extends also to Zanzibar and Aden. Until 2 years ago, our currency—the East African shilling—was managed by an old colonial style Currency Board resident in London. Its sole concern and activity was the issue and redemption of East African shillings against sterling. Now the Board is based in East Africa, and is steadily widening the scope of its activities, so that it is performing many of the functions of a central bank. For example, it has extended the scope of monetary expansion through the fiduciary issue to include not only direct subscription to new issues of Treasury bills and local loans, rediscounting Treasury bills, and purchases of government securities in the market, but also crop finance facilities by discounting bills for

©International Monetary Fund. Not for Redistribution 138 SUMMARY PROCEEDINGS, 1962 vital export crops. Again, by altering, for the first time for many years, exchange commissions for issue and redemption, it has shown itself free to deal, as might a central bank, in the exchange market at its discretion; and it has broken new ground in announcing its willingness to open and maintain accounts in its books for the commercial banks in the three East African capitals. Tanganyika's monetary arrangements are such that, as an inde- pendent state, we have only a partial and minority say in the control of our currency—a handicap which we are very willing to accept as part of the price for preserving the benefits of our Common Market. One result, however, is that any fluctuation in the prices received for our primary product exports has been promptly and vividly reflected in our budgetary position. This is a feature peculiar to our own system, but it is a matter of degree only; for it has been the common experience of most countries reliant upon the sale of primary products and seeking to expand their economies by increasing exports, that their efforts in recent years have been largely negated by falling prices. The lesson for us is unmistakable: the most important basic problems facing these countries is the level of commodity prices and the access of primary products and raw materials to world markets. I can claim but small knowledge in such weighty matters, but it seems to me that the need to find solutions to these problems is complementary to, and just as urgent as, the maintenance and improvement of international liquidity, on which much of the discussion at this meeting has centered. I question whether it is in the true interests of any of us that the prices of primary products should be depressed to a level which drives countries like my own to the conclusion that they must industrialize at any price, even though it may mean the erection of ever higher barriers to trade— not to mention the balance of payments problems which inevitably seem to follow. I question, too, how it can serve the purpose of world economic growth to perpetuate the many existing restrictions on the import of primary products and raw materials by tariffs and quotas and consumption taxes, when the effect is to reduce the purchasing power of primary producers and their demand for manufactured and industrial imports.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR PARAGUAY 139 I venture to suggest that a new and vigorous initiative is needed to resolve these problems. It is not enough to wait, as in the case of coffee, until there is a huge unmarketable surplus threatening disaster; nor should we be content with agreements which solely impose limitations on producers and leave untouched the disincen- tives to consumption in the developed countries. May I, therefore, add my voice to those other speakers who have dwelt on these same issues, in pleading that their importance and urgency be recognized, and in asking for a concentrated attempt to face them just as soon as possible. . . .

STATEMENT BY THE GOVERNOR FOR PARAGUAY

General Cesar Barrientos

In participating in this, the Seventeenth Annual Meeting of the Governors of the International Monetary Fund, the Republic of Paraguay would like to express its appreciation and gratitude for the technical and financial assistance received from the Inter- national Monetary Fund, other international organizations, and the Government of the United States of America. This meeting of Governors of the International Monetary Fund is an auspicious occasion for making a declaration of our faith in international cooperation as a means for seeking solutions to the increasingly acute problems that beset the economic relations of the nations of the world. Those who are responsible for government in Latin America are continually faced with problems arising from the instability of prices for primary products on the world markets. It therefore becomes necessary to impose regulatory measures in order to offset negative price trends. As a means of serving the economic well-being of most of the Latin American countries, Paraguay is an ardent advocate of the very early realization of the principles laid down by President Kennedy in the Plan for the Alliance for Progress.

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As a result of technical and financial assistance, the energetic and patriotic measures taken by the Government of my country to maintain political, economic, and social stability, and the efforts made by our people, it has been possible to make fundamental changes in our economic infrastructure. In August 1957, we adopted the free exchange system, and since that date the value of the guarani, our national unit of currency, has varied by about 14 per cent, i.e., at an average rate of 2.8 per cent per annum. The rate of exchange with the dollar was maintained without variation from October 1960 until the end of last year. Subsequent variations constitute an increase of 2 per cent. In the period between January and May of last year, the rate of monetary expansion was 7 per cent. In the same period of this year, the rate of increase was only 1 per cent. From December last to May of this year, the wholesale price index registered an increase of 1 per cent, in comparison with 6 per cent recorded for the previous year, thus indicating a leveling off of prices that, because of its effect on the workers' cost of living, exercises a stabilizing influence on wages, preventing conflicts between capital and labor. The rate of growth of savings deposits is a measure of confidence in the national currency; and in May of the present year this was 28 per cent, as against 18 per cent in the same period of last year. In September 1960, Paraguay proposed to the Fund a plan for repurchasing its currency, for foreign exchange purchases made under the stand-by arrangement for US$4,250,000, and operations that were to be spread out until September 1963. Up to the present, this plan has remained in operation. In November last, we signed a new agreement for US$5,000,000 for a period of one year. With the approval of the Fund it gave us the right to make drawings within the conditions specified, but it has so far been unnecessary to use these funds, since our inter- national reserves have been sufficient to enable us to meet our external payments regularly. In comparison with December 1961, these reserves have now increased by 43 per cent.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR PARAGUAY 141

These are the reasons why our operations on the market have proceeded normally. This year, the external payments position has improved in comparison with 1961 and is closely associated with the trading surplus achieved, since exports represent 83 per cent of foreign exchange receipts. The increase of 8 per cent in receipts from exports and the reduction of imports by 6 per cent resulted in the achievement during the January-May period of this year of a higher trading surplus than that achieved last year. The value of our basic exports increased in the period in question as follows: timber by 43 per cent; quebracho or tannin extract for tanneries by 42 per cent; cotton by 8 per cent; fruit by 53 per cent; and oils by 6 per cent. Exports of beef are maintaining their previous level. The increases recorded are entirely attributable to a greater volume of exports. Harvesting conditions and output trends in four industries associated with external trade justify the prediction that the figures for this year will exceed those of last year. There has been a 19 per cent increase in bills and coins issued by the Central Bank, due principally to external transactions, the exhaustion of previous deposits by imports of a wide variety of items, and improved credit in the banking sector. The loan portfolio and the investments of the Central Bank are being held within the limits agreed with the International Monetary Fund. Bank loans to the private sector have increased in the period under review by 11 per cent, whereas the comparable figure for 1961 was 2 per cent. The orderly procedures governing the national budget are the principal factor in monetary stability. Revenues from taxation during the period between January and August 1961 were 0 2,000 million, whereas for the same period of this year they were 0 2,460 million. Operating and capital expenditures in both periods were held within the limits imposed by revenues. In 1961, 8 per cent of revenues were obtained from short-term credit operations with the Central Bank. The comparable figure for this year is 5.7 per cent.

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On August 31, 1961, the external debt of the National Treasury was equivalent to US$7,470,809. On August 31, 1962, it repre- sented US$6,480,655 as a result of amortization payments made and the regular settlement of the corresponding interest. The national effort to achieve monetary stability has borne fruit in the sector of public and private investments. From 1954 to the end of 1961, public investments in airports, highways, the merchant fleet, plant for farming and rural industries, waterways, telecom- munications, railroads, and harbors, together with capital con- tributions to the National Development Bank, schools, and health centers, have amounted to US$44,678,171, representing 71 per cent of the cost of the programs being carried out. Of these investments, the funds of the Government itself, without recourse to loans from the national banking system, are equal to 79 per cent of the total amount of financing from external sources. The Paraguayan Government, with the assistance of international agencies, the United States Government, and from its own resources, will proceed with the plans made for the lengthening and paving of highways, the extension and modernization of harbors for shipping, the installation of a hydroelectric power station, and the settlement of land in the areas affected by the new routes. Whilst reiterating the appreciation felt by my Government for the valuable assistance it has received, I should like to point to the corresponding benefits that have been obtained in the form of the rise in the social status of the Paraguayan people, the permanent engineering and other works from which they likewise benefit, and the atmosphere of peace and tranquility enjoyed by the whole country. The private sector has also contributed to economic progress in order to increase its ability to take part in the free trade area agreed with other sister republics of Latin America. From 1956 to the present, firms have been authorized to combine capital resources, under the procedure in the "Act Concerning the Combining of Capital Resources," to a total value of US$22,757,792.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR UNITED ARAB REPUBLIC 143

Similarly, under the procedure in the "Act Concerning Manu- facturing Profits" our industries have, between 1959 and the end of last year, extended and renewed their machinery and plant to the value of 0 352 million, using free market currencies. To conclude this brief survey, which I have endeavored to abridge as much as possible, I am pleased to reaffirm that Paraguay is developing in harmony with the dominant trends in today's world in the direction of multilateral free trade and exchange freedom, and is prepared to cooperate to the fullest extent in the achievement of the high purposes of the International Monetary Fund. At the same time I would like to express, on my Government's behalf, my very sincere gratitude to the Government and people of the United States of America for their hospitality in allowing us to hold this meeting in the beautiful city of Washington, a good augury for the success of our discussions and the continued progress and well-being of the nations represented here.

STATEMENT BY THE GOVERNOR FOR THE UNITED ARAB REPUBLIC

Abdel Hakim El Rifai

It gives me great pleasure to thank you, Mr. Chairman, for your most interesting and instructive opening address. I wish also to congratulate the Executive Board and the staff of the Fund for their comprehensive Annual Report, to express our appreciation for the illuminating statement of Mr. Jacobsson, the Managing Director, and to extend our warmest welcome to the new Arab country, Kuwait, and to other members who have recently joined our institutions. I am confident that they will make valuable contributions to the work of this assembly. The Annual Report constitutes a valuable survey of the economic developments during the last year. It outlines the progress made toward the achievement of the objectives of the Fund, namely, economic stability and sound monetary policy.

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Under the able guidance and management of Mr. Jacobsson, the Fund has acquired a new lease on life and has become the guardian of monetary discipline and stability. It has adapted itself to the evolution of the international economy. The way in which the Fund has carried out its responsibilities as an independent international organization has gained for it respect and high appreciation all over the world. It appears from the Annual Report that the last fiscal year was a record in every phase of operational activity, whether with regard to total sales of currency, number of stand-by arrangements agreed, or repurchases by members. More flexibility has been shown with regard to the use of the Fund's resources and the drawings during the year required, in each case, a waiver of the provision of Article V, Section 3, of the Fund Agreement, which limits a member's drawings, within any 12 months, to 25 per cent of its quota. Drawings from the Fund are no more to be regarded as an emergency measure. Members' drawing rights are now considered as part of their reserves. This extension of the Fund activities, especially under conditions of widespread convertibility and larger movements of capital, required the increase of its resources. In conformity with Article VII of the Fund Agreement, which authorizes the IMF to replenish its holdings of scarce currencies by borrowing, new arrangements were made early in 1962 with ten industrial countries under which the Fund may borrow supplementary resources amounting to the equivalent of $6 billion. The Fund can thus replenish its resources when need arises and be able to "fulfill more effectively its role in the international monetary system." The Annual Report refers to the contrast between the situation of the industrial and the raw material producing countries. While trade of industrial countries in 1961 was nearly 50 per cent above the figures of 1958, imports of these countries from the raw material producing countries increased by only 15 per cent. Terms of trade are moving against the primary producing countries because of the instability of world commodity prices. In his opening address, the Chairman pointed out the difficulties encoun-

©International Monetary Fund. Not for Redistribution GOVERNOR FOR UNITED ARAB REPUBLIC 145 tered by developing countries as a result of the inadequate and fluctuating export receipts. This question was raised at the Conference on Economic Devel- opment Problems held last July in Cairo. The Conference recom- mended the establishment of a compensatory financing system and the stabilization of international primary commodities markets, within the framework of the United Nations, on a fair and remunerative basis, taking into consideration the prices of manu- factured goods. Developed countries are also requested to operate their stock disposal programs without jeopardizing the interests of primary commodities producing countries. We are confident that the Fund, in cooperation with other international agencies, can provide a suitable solution to this problem. It is gratifying, however, to note that many raw material producing countries were able to use the resources of the Fund and that transactions with these countries in 1961 were larger than in any preceding year. We have been also glad to know that proposals for additional compensatory facilities are now under study by the experts of the IMF and other international institutions. The problems of developing countries need more attention on the part of international institutions and developed countries. The IMF is requested to examine the measures for a more effective balancing of the external payments positions of developing coun- tries who vest strong hopes in this institution. While implementing their development plans, they are exposed to balance of payments difficulties. The Annual Report referred to the essential conditions for sustained economic growth. They include technical education, adequate external funds on reasonable terms, maximum access to markets of industrial countries, and the adoption of a sound monetary policy. The shortage of external financing constitutes one of the main sources of the difficulties encountered by develop- ing countries. The remedy consists in the increase of funds available to these countries to enable them to maintain a steady and expand- ing rate of development. The recommendation of the United Nations concerning the allocation of 1 per cent of the total national income of developed countries for financing economic development plans seems very appropriate.

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With regard to the access of developing countries to markets of industrial countries, the Cairo Conference on Economic Develop- ment recommended the following: (1) Industrial countries are requested to abolish tariffs and other obstacles which affect adversely the exports of devel- oping countries. (2) Regional blocs should not operate in a discriminatory manner; otherwise they would be detrimental to the efforts of developing countries. International trade should expand on the basis of nondiscrimination. The adoption of these two proposals will be instrumental in ensuring the smooth functioning of the development plans, because financial aid without opportunity for trade will be of little benefit. That is why Mr. Jacobsson urged the industrial nations to contribute to the welfare of developing countries by adopting liberal trade practices, opening their markets to imports from less developed areas. The Annual Report refers to policies regarding financial stability and has noted with satisfaction the progress toward the implementation of stabilization programs in a number of member countries. The United Arab Republic laid down a comprehensive stabilization program, and late in April 1962 agreed with the Fund on a stand-by arrangement. The program entered into force on May 15 and has been progressing satisfactorily. It aims at the simplification of exchange systems, the elimination of multiple currency practices, the gradual abolishment of restrictions on current payments, the stimulation of exports, and the encourage- ment of savings. With the expansion of the activities of the Fund and its recent liberal attitude toward drawings by member countries on its resources, close cooperation between the members of the Fund has made concrete progress and it is expected to have far-reaching effects. As Mr. Jacobsson has rightly stated in his stimulating lecture delivered in Cairo last May, "the problems that exist in the world are not easy and they will be solved by no country in isolation."

©International Monetary Fund. Not for Redistribution GOVERNOR FOR PORTUGAL 147 Finally, I should like to pay tribute to the retiring Deputy Managing Director, Mr. Merle Cochran, for his long service in the Fund. I wish him many happy years of useful life.

STATEMENT BY THE GOVERNOR FOR PORTUGAL

Rafael Duque

This is the first meeting of the International Monetary Fund I have had the honor to attend as Governor for Portugal. You will therefore understand if my first words are a tribute to the spirit that inspired the Bretton Woods Agreements and to the men who designed the structure of the International Monetary Fund and defined its high objectives. Also, I would not wish to fail to stress the fact that its doors are open to all the peoples of the world. The Monetary Fund is now an agency rich in experience, enjoying an international prestige that is fully justified by the acknowledged abilities of its staff and more especially by the wisdom of the policies that have been followed by its directors. As a result of the prestige it enjoys, an increasing number of new members have joined the Fund, which has today a membership of 82, giving the Fund greater authority to act on behalf of the aspirations of all and placing it in a strong position to assist in determining and carrying out, on a world scale, the measures necessary to achieve monetary equilibrium. We cannot but congratulate ourselves on the fact that this increase in the Fund's authority should have taken place at a time when it is increasingly necessary to deal with the new and, in some cases, urgent problems arising from the acceptance of convertibility by a considerable number of industrial countries. Nevertheless, the gradual increase in the number of countries with convertible currencies, whether or not subject to the Article VIII procedure, and the steady process of liberalization of trade, in which we have taken part, have without doubt altered the inter-

©International Monetary Fund. Not for Redistribution 148 SUMMARY PROCEEDINGS, 1962 national financial scene, bringing into being a series of relationships that could not have been foreseen by the experts in 1944 when they drafted the Fund's Articles of Agreement. New and sometimes brilliant schemes for possible reforms in our organization have been submitted to world opinion. Although some of these ideas may appear alluring, a realistic analysis of the present position will probably indicate that it would be best to reject such schemes. We should also recognize that the results of the Fund's activities continue to give satisfaction to the member countries, the few difficulties arising from the Articles of Agreement having been skillfully overcome by the adoption of suitable legal interpretations by the Executive Board. Portugal thus has complete confidence in the operations of the Monetary Fund, which, by both its traditions and high example, has always proved itself to be equal to the demands made upon it in the sphere of international financial cooperation. But this is not to say that my country is not following with keen interest certain aspects of the Fund's administrative policies, such as those relating to the accessibility of funds, where it might be possible to adopt more automatic procedures. I need hardly stress that these observations do not arise from our own relations with the Monetary Fund. My country has not submitted any application for drawing, and the level of our reserves of foreign exchange does not suggest that any recourse to the Fund will be necessary in the near future. I should not, however, fail to point out that my country is at present at a stage of economic growth at which an intensification of development in the next few years might possibly lead to balance of payments difficulties. If this were to be the case, the Portuguese authorities hope that it will be possible for them to have recourse to the Fund on terms that would stimulate the economic advance- ment of the country. Moreover, this problem, if it were to arise, would be considered by the management of the Monetary Fund with a full knowledge of all the facts, as they already have sufficient data to enable them to evaluate my country's economic situation. A Fund mission was

©International Monetary Fund. Not for Redistribution GOVERNOR FOR YUGOSLAVIA 149 recently in Lisbon, where it had extensive discussions and made contacts with responsible Portuguese authorities and experts, from which it doubtless obtained an objective view of the problems. I should like to take this opportunity of expressing to the members of the mission, and especially to its chief, how much we appreciated the interest manifested by them and the all-embrac- ing—albeit impartial—nature of their review of the various aspects of my country's position in the economic, financial, and exchange spheres. In this instance, as in others, our official relations with the International Monetary Fund have invariably been marked by a spirit of friendly cooperation, equally apparent in the manner in which the problem of the par value of the escudo, recently approved by the Fund, was considered and decided upon. I would therefore like, before concluding, to express my country's sincere desire to see the continuance of the spirit of understanding and good will, exemplified in the person of the Fund's Managing Director, Mr. Jacobsson, to whom I am pleased to pay tribute for his exceptional abilities as a leader and who has contributed so much to the consolidation of the international financial structure. There is a Latin proverb that says of orators, esto brevis et placebis—"be brief and you will please." I do not think that I have spoken at great length, even if I may have to admit that I have not succeeded in pleasing.

STATEMENT BY THE GOVERNOR FOR YUGOSLAVIA

Nikola Miljanic

First of all, I would like to associate myself with the previous speakers who have expressed their gratitude to the Executive Board and staff of the International Monetary Fund for their very interesting and comprehensive Annual Report. I would like particularly to stress how great a pleasure it was for me to listen to the excellent introductory speech of our Managing Director, Mr. Jacobsson.

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This year's Annual Meeting is being held under conditions which indicate a further growth of the world economy, although certain regions show a slower rate than in earlier years. May I be permitted to take this opportunity to point once more to certain problems which are very important, in my opinion, for the future develop- ment of the world economy as a whole. I believe you will agree with me that one should point to the fact that this year's Annual Report pays much greater attention to the question of the underdeveloped regions than was the case in previous years. In fact, these problems may be characterized as the central problems of the world economy of today. The Fund's approach to the problems of underdeveloped regions is certainly a very positive one, and I can only express my hope that the Fund will direct its activities toward finding concrete solutions for such problems. Preparatory work for the creation of a stabilizing mechanism for compensatory financing of primary producing countries, whose balances of payments are under special pressure because of great fluctuations in export commodity prices, is only one in the range of the measures to which the Fund should give top priority and contribute to its speedy realization. International trade has been developing in the postwar period at a relatively speedy rate. World exports greatly increased during the period from 1953 to 1960. However, to our regret, this increase was not evenly spread over all countries; the increase of exports of primary producing countries was much slower, and therefore the relative share of these countries in world exports diminished. This fact may bear significant influence on future development of economic relations in the world. I am fully aware that great efforts of all of us will be required in order to eliminate gradually this inconsistency. It is, therefore, of utmost importance that the policy of each individual country, as well as the policies of individual regions, be directed toward that aim. A trend aimed at nondis- crimination and the world-wide character of such developments could greatly contribute to the solution of these problems, whilst a policy of discrimination—that has regretfully gained wide

©International Monetary Fund. Not for Redistribution GOVERNOR FOR YUGOSLAVIA 151 application—considerably aggravates them. The integrated indus- trialized countries ought to find ways and means for the elimination of obstacles in international trade through constructive cooperation with developing countries. A speedy and harmonious economic development in the world, under the necessary financial and monetary stability, is certainly the basic problem of today. The resolution of the last session of the Economic and Social Council recommending a United Nations Conference on Trade and Development could be classified among those decisions reflecting efforts directed toward such basic aims. I believe that the Fund will actively participate in the work of that Conference. At the beginning of this year, a decision was taken by the Fund on general arrangements to borrow. In essence, this decision is, among other things, of prime importance. I will not elaborate this question further now, but I would like to express my regret that this action was not of universal character. I believe, however, that the Fund should now devote some thought to the problem of finding ways to improve the existing mechanism which is being applied to other member countries, and especially those which, in their justified wishes for a speedy economic development, are faced with specific difficulties. Although these difficulties are very often connected with problems of long-term financing, they come also very often within the province of the Fund. I think that the Fund could now manifest greater boldness in making its own resources available where needed. At this point, I can only repeat what my predecessor said at last year's meeting, namely, that one could expect that both conditions and criteria for the use of Fund resources would be adjusted to the changed pattern of membership, and that, in this respect, more attention would be paid to specific balance of payments problems. The time has come when the question of possible revision of these conditions and criteria should find a place in the future activities of the Fund. Finally, I would like to congratulate the Fund on the top figures reached in the past year in respect to the utilization of its funds. I would also like to express my welcome to the member countries which have recently joined our organization.

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At the same time, I would like to join my colleagues in paying tribute to Mr. Cochran for his distinguished service over the past years and to welcome the appointment of Mr. Southard to be the new Deputy Managing Director.

STATEMENT BY THE GOVERNOR FOR IRAQ

Bakir Al-Dujaili

Mr. Chairman, I would like first to congratulate you on your conduct of our meetings and your valuable statement on the opening of this session. We do believe in the expansion of these organizations and wholeheartedly welcome the growth of their membership. We are glad indeed to see among us this year representatives from the new member countries. While welcoming the new members, I would like to express my Government's strong protest against the acceptance of the so-called Government of Kuwait as a member in these international insti- tutions. It is hardly necessary to mention at this meeting that the province of Kuwait constitutes an integral part of Iraqi territory. The admission to membership of an artificial state which is a part of an original member's territory is a grave error which is bound to undermine the faith and confidence of the world com- munity in the independence and unbiased character of our organizations. The Report before the Board of Governors has presented the familiar picture: the industrialized countries have increased their production and national income and maintained a steady rate of economic growth, while the progress of the less developed countries has not been satisfactory, with most of them lagging behind. In spite of the efforts made by the developing countries them- selves, and the substantial international, multilateral, and bilateral aid given to them, the average per capita income of 100 under- developed countries, with a total population of 1.25 billion, rose from $90 to $100, or 1 per cent annually during the past decade. This is indeed a disappointing result.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR IRAQ 153 If capital investment in the underdeveloped countries could be raised from its present level of $4 billion to $7 billion, the estimated annual per capita income would be doubled before 1990. But by that time, the gap between the standards of living of the peoples of underdeveloped countries and advanced countries will have grown even wider. In order to assist the less developed countries in their strenuous efforts to develop their own economies, it is necessary to eliminate factors which tend to aggravate the foregoing problem; that is to say, the problem of disparity in development. Foremost among these factors—to which many of my colleagues have already referred at previous meetings—are the various measures which have been adopted by certain industrially advanced countries and the resultant decline in prices of primary commodities. I should like to express here the concern of my country as to the impact of such measures which adversely affect our exports and which have been causing serious deterioration in our terms of trade as well as in our balance of payments. In this connection, I may mention in particular the unilateral and unjust steps taken by the oil companies in reducing oil prices and impeding the steady growth of oil production in my country. The prevailing prices of crude oil in the Middle East are today lower than ever before since 1952. At present, they are 18 per cent below their level in 1957. In comparison, the prices of industrial products have repeatedly and sharply increased during the last few years. We deem it necessary and urgent that the prices of oil should be so adjusted as to compare fairly with the average comparative prices of industrial products imported by the oil exporting countries. The implementation of our economic development projects is strongly tied to this factor, and I am sure that there are many other countries who face the same problem, and who justly demand that they receive their legitimate share in their own resources rather than be forced to ask for financial aid from other sources. The new regional economic blocs formed by advanced countries constitute another factor in the hampering of development in other areas. These blocs, and in particular, the European Common

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Market, would no doubt increase prosperity in industrial Europe but at the expense of developing areas in different parts of the world. They are measures aiming at solving political problems by causing further grave economic problems to the underdeveloped countries. It is the belief of my country that international trade should not be hampered by such discriminatory schemes. To the contrary, it is the duty of the advanced countries to adopt positive and continuous measures to ensure that exports from under- developed areas to their markets are expanded steadily. However necessary foreign loans and grants for their economic development, it is to be recognized that what underdeveloped countries need most is Trade and not Aid.

©International Monetary Fund. Not for Redistribution CONCLUDING REMARKS *

BY THE CHAIRMAN OF THE EXECUTIVE BOARD AND MANAGING DIRECTOR OF THE INTERNATIONAL MONETARY FUND

Per Jacobsson

In the speech of President Kennedy, which we heard yesterday, we had an eloquent affirmation of the importance of international cooperation, and a pledge of the continuing participation of the United States in this cooperation. The President expressed his deep conviction that whatever the immediate sacrifices involved, this was an enlightened policy in the true self-interest of his and other countries. I think I can say that the tenor of the speeches by Governors at this meeting shows that there is a general awareness that the true self-interest of every country is best served through international cooperation, and they referred especially to monetary matters. Many Governors here expressed their confidence that this coopera- tion can be effectively translated into practical politics, which can ensure the solution of the immediate problems and those that lie ahead. We have heard from many Governors of the problems that are affecting their own countries. Some of their problems are largely domestic in character, such as questions of wage policy, taxation, mortgage rates, and others, and these problems have now, for many countries, to be considered as part of an adjustment to more stable price levels. But many of the problems have, at the same time, to be considered with an eye to the international situation. Indeed, it is being increasingly realized that there are more and more aspects especially of fiscal and credit policies where international

1 Delivered at the Closing Joint Session, September 21, 1962. 155

©International Monetary Fund. Not for Redistribution 156 SUMMARY PROCEEDINGS, 1962 contact and cooperation are necessary. Many Governors have also spoken of development assistance. Here, too, the richer countries which extend the aid are aware that they have an interest in acting in concert when making aid available to developing countries. But it is still a problem for the developing countries and for the countries extending aid whether they should act primarily in an international setting or through bilateral relationships. Mr. Black referred at some length to these problems in his speech on Tuesday, stressing the advantages of granting aid in an international frame- work, and for my part I wish to reiterate my belief that the Fund will be more concerned with development problems in the future than it has been in the past. Many Governors also drew attention to the need for the develop- ing economies to have ready access to the markets of the industrial countries, and in this connection I cannot express too strongly my conviction that the lowering of trade barriers of all kinds against the exports of the less developed countries is in the mutual interest of both the industrial countries and the nonindustrial countries. We have also to continue our work on the problems for the primary producing countries arising from the fluctuations in the export earnings for their products. The Fund will pay close attention to this question, as well as to the more general problems of the developing countries. But while numerous problems remain in the industrial as well as the developing countries, a great many Governors expressed the view that there has been a major improvement in the over-all payments situation, due in the main to a better balance between costs, prices, and interest rates among the principal industrial countries. At the same time, they welcomed the strengthening of the defenses which are now available to meet any strain on the inter- national payments system. Indeed, the improved distribution of monetary reserves, the establishment of reciprocal central bank credits, and the availability of the resources of the International Monetary Fund, shortly to be fortified by $6 billion of supple- mentary resources, are crucial factors in the maintenance of good

©International Monetary Fund. Not for Redistribution CONCLUDING REMARKS BY MANAGING DIRECTOR 157 order in the international payments system. However, the Gov- ernors fully realize, and stated quite clearly, that no defenses, however substantial, can in themselves ensure stability unless appropriate policies are pursued in the individual countries. The over-all improvement has been reflected in recent move- ments on the exchange markets; and I think we can say that the industrial nations, whose currencies provide the main elements of the international credit system, are enjoying a period of relative calm and consolidation. This gives us the opportunity to consider our various problems, and the suggestions which have been made for coping with them in an environment of expanding trade and greater confidence. A great number of Governors referred to the problem of world liquidity. The consensus was, I think, that there is, at present, a sufficient degree of liquidity to finance expanding world trade, and many Governors emphasized the usefulness of the various steps already taken, whether through increased cooperation or otherwise, to strengthen the system. While there were many expressions of confidence about the future, there were a number of suggestions advanced with the aim of ensuring that as world trade increases a satisfactory level of liquidity will continue to be maintained, however the basic conditions may change. I cannot comment at this stage upon the various suggestions made, some of a more limited character, some of a rather far-reaching nature. They must all be carefully examined. I can only say that the Fund will give the fullest consideration and closest study to the ideas expressed by the Governors as part of its continuing consideration of world liquidity problems. There is one last point of a general character which I should like to make. There was unanimity among the speakers on the question of the importance of establishing and maintaining mone- tary stability in the industrial countries as well as in the developing countries. I think it is experience, sometimes very bitter experience, that has shown that this is the right policy. Policies of stability in individual countries will be most readily pursued if international

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conditions are such as to facilitate a healthy and expanding world economy with neither inflation nor deflation. We have to watch the signs of the times and adjust policies accordingly; but as I said at the beginning, we have to do it together. I cannot let this occasion go without a special tribute to the work of the Executive Directors and the staff. Many Governors have spoken of the Fund's record activities of recent years, and the successful conduct of those activities. For the Executive Direc- tors, the intense work has required very frequent meetings of the Board, and has of course called for much work between the meetings. I need not point out how much this involves in the way of study, discussion, and liaison. It is a pleasure for me to testify how the relations of mutual confidence established over the years within the Board of Executive Directors have helped to render its work both effective and agreeable. We are all deeply indebted to them. This leads me to the staff. With little increase in numbers this body of devoted international civil servants has carried the burden of much increased work. Week after week, the study and considera- tion of one important question has not been finished before a new urgent question arose. What can one say except that the work has been done, and that the staff has never failed to put forth the ever-increasing effort that this has required? It is a privilege for me to be the head of this staff, and perhaps that is all that I need say to convey my feelings. I would in closing not like to allow the occasion to pass without adding a few words of my own to what has already been said by so many Governors in taking leave of three men on whom has fallen, for a number of years, a great part of the responsibility for the affairs of our institutions: for the Fund, Mr. Merle Cochran; and for the Bank, Mr. Eugene Black and Sir William Iliff. It has been a great joy for me, as I am sure it has been for others in the Fund, to have listened to the appreciative words that have been said about the contribution made to the Fund by my old friend, Mr. Merle Cochran. These have been years of much hard work, and I know that all that has been achieved could not

©International Monetary Fund. Not for Redistribution CONCLUDING REMARKS BY MANAGING DIRECTOR 159 have been carried out without the unstinting devotion to the Fund and its work which Mr. Cochran has shown over the past nine and a half years, the longest period in which anybody has served in a management capacity in the Fund. I met Mr. Cochran for the first time at a meeting of the Bank lor International Settlements in 1931. Financial problems have been a major interest of his life, and the happy combination of this interest with his training and skill as a diplomat has proved invaluable to the Fund through many complex negotiations and other problems. There are many ways that I could mention in which he has contributed to the Fund over the years, but I must limit myself today to stressing one or two which I consider the most important. In the first place, I must recall his great knowledge of the developing nations, his great sympathy for their point of view and understanding of their aspirations and endeavors, to which several Governors have referred in their speeches. Secondly, over a long career he has had great administrative experience, and his organizational capabilities and skill have been of inestimable value over the past decade—a decade for the Fund of considerable development and expansion. I would like to mention particularly one very solid result of this work: more than anyone else, Mr. Cochran was responsible for the Fund's building at 19th and H Streets, a lasting monument of which he can be justly proud. There have in these years been periods of intense strain and difficulties, but Mr. Cochran has learned to live easily with great problems, not losing his calm, but always ready for decisive action. Many of us will miss him as a close personal friend, and we shall all miss his presence and his counsel in our daily tasks. He will carry with him when he leaves the Fund next month the thanks and the best wishes of us all. May I also take the opportunity of welcoming very warmly Mr. Frank Southard to his new position as Deputy Managing Director. He knows the Fund and the Fund knows him. We shall miss his well-considered and penetrating statements as an Executive Director, but he will be able to give all of us the benefit of his great qualities in his new position as a member of the Management of the Fund.

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Mr. Chairman, I would like to say a few words to Sir William Iliff. I knew Sir William before I came to Washington. But after seeing his work from close at hand over the past six years I have come more fully to appreciate his firm grasp of problems and the friendly but decisive manner he shows in dealing with his colleagues and the many countries with whose difficulties he has so patiently and effectively concerned himself. He has always been ready to discuss and work out solutions to problems of mutual concern to the Fund and the Bank, showing, beneath his easy Irish manner, adroitness in his handling of a wide diversity of problems and also all the necessary determination to resolve them. May I convey to him my personal thanks and the thanks of the Fund for the friendly and cooperative spirit he has shown us all over the years and express the hope that whatever he may undertake in the future he will maintain contact with his many friends in the Fund. Mr. Chairman, I would like to end by saying some words to Mr. Eugene Black. He made on Tuesday morning an effective and moving speech in the course of which he announced his decision to relinquish his position as President of the Bank. As I listened to his speech I could not help thinking how characteristic of him it was—-forceful, expressive, varied, reflecting his powerful mind and also his knowledge of literature. There is a famous saying in France by de Buffon: Le style est Vhomme meme—"Style is the man himself." For Mr. Black, style is something that permeates his whole being, his elegant appearance, his easy humor, and impressive bearing, which makes him stand out in any company. He enjoys a high reputation in the world for what he has achieved over the years as head of the World Bank, but for those of us meeting here, he is held in equally high regard as a man, for his intelligence and imagination, his charm and friendliness. No wonder he is what the French call un homme recherche, a man much sought after in society and in business. But I am glad that in all these years he has withstood other attractions and remained here to serve the Bank and, through the Bank, the world. I am sure he remembers the words that Shakespeare put into the mouth of Othello: " I have done the state some service and they know it." I think we can say about Mr. Black today: "He has done the nations great service, and they know it." Representatives

©International Monetary Fund. Not for Redistribution CONCLUDING REMARKS BY MANAGING DIRECTOR 161 of member countries have in these past days told him so in unmistakable language. Tangible evidence in the buildings, fac- tories, roads, harbors, hospitals, and schools, financed by the Bank in so many of our member countries, will be a lasting memorial to Eugene Black's contribution to the welfare of nations. For my own part, having served for over forty years in inter- national life, I can recall living through moments of despair, in times of peace as well as during the war, about the prospects for cooperation among nations. For me it is a great moment to be able to salute a man who has done so much to enhance the prestige of international service to the benefit both of the institutions he presided over and the cause of international cooperation in general. I want to express, too, my personal thanks for what he has done since I came here to help me attain a better understanding of many problems and personalities, and also to thank him for his part in maintaining close cooperation between the Bank and the Fund. Let us also at this time express to his charming and gracious wife, Mrs. Suzette Black, our best wishes and our admiration of the contribution she has made, both at the side of her husband and for her own part, to enhance the more agreeable aspects of international financial life. A comforting thought today is that, although Eugene Black may shortly be relinquishing his present office, he cannot escape from remaining an international figure. I think I can express the hope, as President Kennedy did in his address yesterday, that when difficult problems arise in the future, Eugene Black will still be willing to make his services available in situations for which his exceptional talents befit him. So we now wish him great satisfaction in his future activities—which, I am sure, will from time to time include a return to the international scene. When Mr. Black in his address on Tuesday announced his decision to relinquish the Presidency of the Bank, he said that this would be the last time he would be attending this meeting in his present capacity. Perhaps we may take this as a hint that he will be prepared to attend in some other capacity; but whatever the capacity, I can assure him that he will always be welcomed and honored whenever we assemble in the future.

©International Monetary Fund. Not for Redistribution STATEMENTS BEARING ON FUND POLICY, DELIVERED AT SESSIONS OTHER THAN THE DISCUSSION OF THE FUND'S ANNUAL REPORT1

STATEMENT BY THE GOVERNOR FOR Toco2

Hospice D. Coco

It is with much pride and great satisfaction that my delegation participates for the first time in the discussions of this meeting as a member of the four great international financial organizations. Togo, through its past, and through its position as a former territory under the trusteeship of the United Nations, has a special calling for international affairs. It is therefore in a spirit of complete solidarity that our people and their Government intend to join your organizations. Although we are proud to have struggled for and obtained political independence, our people are fully aware that this essential stride is only one step taken in the heavy and difficult task of turning their small country into a modern developed country in an already heavily industrialized world where the structure of production is becoming more and more gigantic. That is why we expect a great deal of the International Bank, the International Development Association, the International Finance Corporation, and the International Monetary Fund.

1 Annual Discussion of the IBRD, IFC, and IDA, September 18, 1962; Second Joint Session, September 20, 1962; and Closing Joint Session, Septem- ber 21, 1962. 2 Delivered at the Annual Discussion of the IBRD, IFC, and IDA, Septem- ber 18, 1962. 162

©International Monetary Fund. Not for Redistribution GOVERNOR FOR TOGO 163 But far from our minds is the idea that the various forms of aid that we may obtain through these international organizations and from bilateral sources should be a substitute for our own efforts in the conduct of the immense tasks that lie before our young nation. Had that been the case, our independence would have had no meaning. We realize that in a world strongly dominated by technology and the structure of the relations existing between developed and underdeveloped countries, our efforts would be futile if they were not supported by external assistance. . . . But, beyond those tangible and important services [expected from the IBRD, IDA, IFC, and IMF], we hope that these great world organizations will help us to solve the economic and financial problems that arise in a world that is more and more interdependent. In the first rank of these problems we would place the one that arises from the deterioration of the terms of trade in primary products. It is indeed futile to request our rural people to make an effort and to make additional sacrifices if they are immediately crushed by the fall in the prices of their products. While agreements like the one on coffee, to which we are a party, may be a temporary alleviation, the only lasting solutions will be long-term ones that will enable the underdeveloped countries to have a favorable share in the growth of world production in harmony with the growth of world demand. We wish to express our firm hope that in these international organizations such solutions may be conceived, matured, and carried out. We also hope that the Bank and the Fund will be able to contribute ever more effectively to the development of international credit and to the application of a fiscal policy, on a world-wide scale, that will facilitate the emergence of the nations still economically weak. Togo, for its part, will always be happy to contribute to the development of solidarity and cooperation on a world-wide scale. While our country pursues a policy of increas- ingly close economic cooperation with its regional neighbors, this is not to the detriment of a policy of African unity, but is done in the hope that this regional group will strengthen and develop the region's economic relations with the whole of Africa and thus contribute tangibly to the achievement of African economic unity.

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Moreover, we conceive of our association with the European Economic Community and of our membership in the Franc Zone as a reciprocal cooperation that will permit rapid growth of trade between partners and serve as a support for the development of our trade with the rest of the world. We express the hope that our brother countries which are not yet members of these great organizations will be in a position to join us before the next meeting. . . .

STATEMENT BY THE GOVERNOR FOR GHANAS

F. K. D. Goka

Mr. Per Jacobsson, in his statement to this meeting yesterday, spoke at some length on the question of replenishing of Fund resources by borrowing. The negotiations which were conducted after the Annual Meeting in Vienna last year have led to arrange- ments by which the Fund would be entitled to borrow $6 billion under Article VII of the Fund Agreement. We, in principle, welcome these arrangements, although they are not especially designed to meet the needs of primary producing countries. We nonetheless welcome them because we feel it is in our general interest to devise ways and means of forestalling any impairment of the world's payments mechanism. It is the hope of my delegation that, in administering these arrangements, great care will be taken by the participants, who are the main industrialized countries, to ensure that the authority of the Fund as an international institution is in no way weakened. It can be said that the past year has been characterized by two major global economic problems. The first was the threat to the international payments system which resulted from pressure on the two key reserve currencies. The other was the continued decline in primary commodity prices. Now that we have been assured by

8 Delivered at the Annual Discussion of the IBRD, IFC, and IDA, Septem- ber 18, 1962.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR GHANA 165

Mr. Jacobsson that the first problem is on the way to solution, I would like to suggest that the next assignment should be an attack on the general problem of price stabilization for primary products. It is becoming increasingly clear that the threat to the stability of the world's economy and payments system, and indeed to world peace, coming from falling commodity prices, is as great as that caused by continued pressures on the two key reserve currencies—the dollar and the pound sterling. In Ghana, we have had very difficult experiences in the last three years arising primarily out of this downward trend in commodity prices. The average price of cocoa, which was <£G 352 per ton in 1958, fell to £G 177 per ton in 1961. In fact, during this 1961/62 cocoa season, the world price of cocoa fell to its lowest level of the postwar period. I have no need to tell you what has happened meanwhile to the prices of our imports or the size of our population in these seventeen years since the war. As a result, our trade balance deteriorated from a surplus of nearly «£G 20 million in 1958 to a deficit of some <£G 28 million last year. Far-reaching adjustments have had to be made to meet this situation and, as a result, in the first half of 1962 our trade balance moved into surplus. These adjustments have exerted, collectively, a deflationary pressure on the economy as a whole. With a growing and increasingly better-educated labor force, there are obvious limits to the extent of deflation that is consistent with social stability. Although we have had generous accommodation from the Fund in meeting a part of this problem, the basic difficulty remains unresolved. In the United Nations and other forums, Ghana has taken part in discussions with a view to working out a stabilization scheme for cocoa. These discussions have not yet yielded any results. The imbalance between supply and demand on the cocoa market continues. It is difficult to envisage what other recourse would be open to us if, in the near future, agreements are not reached on a stabilization scheme for cocoa, or appropriate and comprehensive arrangements for compensatory financing are not devised. My delegation is of the opinion that only some such scheme will enable us to absorb the losses in foreign exchange receipts arising from the decline in world cocoa prices.

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Under present arrangements, such as our drawing rights in the Fund, the volume of accommodation available to a country like ours is relatively small compared to the not unusual short-term fluctuations in balance of payments due to a fall in cocoa prices. Moreover, the existing arrangements are essentially designed to meet temporary payments difficulties. But the problem of falling cocoa prices, indeed of declining prices for primary products in general, is not a temporary one. As I have said, the deterioration in the cocoa market has now lasted four years and seems likely to continue for some time. During the last year, like other developing countries, Ghana has had to resort to short- and medium-term borrowing on an extensive scale. As the Chairman remarked yesterday, there is a limit to this process. It is against this background that my Government would support any satisfactory proposals that would be advanced for a substantial increase in the resources of the IDA. We feel that it is only when long-term loans at low rates of interest are available on a considerably larger scale, that underdeveloped countries can hope to diversify their economies to the point of pro- viding adequate standards of living for their growing populations. Whilst long-term loans at low interest rates or even outright grants are necessary and welcome, it is essential also that the developing countries continue to have access on a nondiscrimina- tory basis to the markets of the industrialized countries. It follows, therefore, that my Government views with great misgivings any regional economic groupings which tend to introduce new elements of a discriminatory character into the established patterns of world trade. Ghana, along with all primary commodity producing countries, is under great pressure to find new markets for its products. It is regrettable, but nonetheless a political fact of our times, that a large group of countries who seem to offer a potential market for primary products are not members of our organizations. Trade with them therefore necessitates special arrangements. Experience has shown that some form of trade and payments agreements with these centrally planned and state-trading countries is indispensable

©International Monetary Fund. Not for Redistribution GOVERNOR FOR GHANA 167 in any efforts to increase our trade with them. It is my hope that the peculiar problems posed by trade with these countries will at some stage be studied dispassionately and sympathetically by our organizations. In fact, it would seem that the time has come when a generally accepted set of principles should be devised to govern the trading relationships between countries with different economic systems. Permit me to touch on a related matter which my delegation thinks has an important bearing on the present economic imbalance facing primary producers. This is the issue of world peace and disarmament. We feel that without a serious and sincere desire on the part of the present two world power blocs to live and let live, to encourage world trade between the two economic systems, and to divert a portion of the scarce resources now devoted to war preparation, the gap between the underindustrialized and indus- trialized nations, instead of closing, will widen still further. The Government of Ghana intends to introduce early in 1963 a new seven-year plan for the development of the country, aimed at diversifying its economic structure. In this connection, we have undertaken a complete review of our trading and financial arrange- ments. It is obvious that Ghana will require considerable capital assistance from abroad to implement this program. In the difficult period of adjustment during the last four years, we have had to take measures to safeguard our financial position which have not always been understood by our friends and critics. Some of the latter have sometimes seemed to us persistently unfair. However, we are also learning from our experiences and from the reactions of our trading and financial partners to them. The Government of Ghana fully intends to take cognizance of the friendly advice that it has received in the process of reformulating its financial and economic policies. We are hopeful that the response of the world community to these new undertakings and policies will be generous and forthcoming.

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STATEMENT BY THE GOVERNOR FOR THE FEDERATION OF MALAYA4

Tan Siew Sin

It is customary on an occasion of this nature for a country delegation to give a brief account of its position and problems in the financial and economic fields. The Federation of Malaya, like other member countries of the Bank and Fund, has its own story to tell, but I believe that a common thread runs through the experiences of developing countries like ourselves which are largely producers of primary commodities, and quite often we have to rely heavily on only one or two of such commodities for the bulk of our export earnings. It is, of course, true that those of us who are in this category may have our particular or special problems. Most of us require more development aid; many are faced with the perennial problem of balance of payments difficulties; others may have to surmount the barrier of an overpopulated country striving to increase a standard of living which is low even by the standards of developing countries; some suffer from all three disabilities; but one central problem overshadows all others insofar as we are concerned. I refer to the problem of the growing disparity in the terms of trade between the highly industrialized countries on the one hand and the developing countries on the other, arising from the fact that the prices of primary products have not, by and large, in the postwar years, kept pace with the increase in the prices of manu- factured goods. As such manufactured goods form the bulk of imports of the developing countries and as such goods also come mainly from the industrialized countries, this means that the value of primary commodities is decreasing in relation to that of manu- factured goods in terms of purchasing power. This ever-widening gap between the value of exports and imports of the developing countries can only be closed by producing a greater volume of

4 Delivered at the Annual Discussion of the IBRD, IFC, and IDA, Septem- ber 18, 1962.

©International Monetary Fund. Not for Redistribution GOVERNOR FOR MALAYA 169 export commodities for the same volume of imports or by a number of measures taken in concert. Of one thing, however, we are certain, and that is that this problem cannot be solved by increasing either the tempo or the volume of development aid, however generous. This is only a palliative which does not go to the root of the problem. In this connection, I would like to say that we welcome the announcement contained in your opening address, Mr. Chairman, that the Gov- ernors of the International Development Association have before them proposals for a possible increase in the resources of IDA. This is certainly a move in the right direction. Coming back to the main problem, it is submitted that its crux lies in ensuring that the prices of primary commodities are firstly stable, i.e., not subject to wide fluctuations in price over the short term, and secondly, they are fair in relation to those of manufactured goods. To be fair to the industrialized countries, which, in effect, means the countries of the Western world, there is a growing awareness that this is an important problem, but it appears that there is still no sense of urgency in coming to grips with a problem which could have formidable and world-wide repercussions if it were allowed to get out of hand. Time is certainly not on our side. One solution for the developing countries is for those who are substantial producers of the same commodity to come together and market their product through one central selling organization in order to secure a fair and stable price for it. It might also be borne in mind that stable prices are in the interests of consumers as well as producers, for in such case the former can plan their manufacturing operations with greater precision in the field of costings. There is, I believe, at the moment, a tentative proposal which is being examined by a United Nations committee which has as one of its aims the provision of what has been termed compensatory financing for countries which are in temporary balance of payments difficulties as a result of a sharp fall in commodity prices. If I may say so, the basic defect of such a device is that such compensa- tory financing might be used to cover only a current account

©International Monetary Fund. Not for Redistribution 170 SUMMARY PROCEEDINGS, 1962 deficit. Its use under such circumstances, particularly in a nonpro- ductive field like social services or defense, would actually worsen the position of the country concerned in the long term when the time conies for repayment, as good debtors eventually repay their debts. A more promising solution might be the creation of an interna- tional stockpile for each commodity. It is, of course, agreed that each commodity will have to be studied on its own merits and plans made accordingly, but the general principle would be the same. We are also aware of the usual arguments which have been advanced against such a scheme, namely, that they tend to freeze world patterns of trade permanently and thus lead to permanent distortions of trade. Another argument which has been advanced against this broad conception is that if floor prices tend to be too high, and hence unrealistic, they will only postpone but not eliminate the final day of reckoning for producers living in a fool's paradise of a sheltered market. It is submitted that if the scheme is made sufficiently flexible and realistic, particularly in relation to matters like the floor price, there is no reason why it should not be both workable and enduring. In passing, it is for consideration whether the United States, for example, might do worse than to turn over that portion of its strategic stockpile regarded as surplus to its foreseeable strategic requirements to some international agency like the International Monetary Fund. In return, the Fund could issue that country bonds backed by gold. Another solution, and this is one which is being increasingly resorted to by developing countries, is to industrialize as rapidly as possible. Here again, we encounter a serious obstacle if we become really successful. It is clear that if we are to industrialize successfully we must be able to export the products of our manu- facturing industries to the industrialized countries, which, at the moment, are the only ones capable of absorbing them in any significant quantity, owing to their much greater purchasing power. However, the moment that inroads are made into the economies of such countries, that is, the moment a point is reached where imports of manufactured goods into the countries of the Western world are likely to diminish the production of the same goods

©International Monetary Fund. Not for Redistribution GOVERNOR FOR MALAYA 171 produced by their home industries, trade barriers are put up or gentler methods of coercion, euphemistically termed "voluntary" limitation of exports, are used. It should not be too much to ask the industrial countries to consider allowing easy entry for manu- factured goods from the developing countries. The net result may be that the developing countries come up against a blank wall whichever way they turn. Under such circum- stances, they would forever be in a position of suppliants for aid and charity. This could be most unfortunate, as in their desperation they might turn to drastic remedies and, in the process, bedevil relations between the countries of Asia and Africa on the one hand and those of the Western world on the other. It might be thought that this alarming tendency, which I have tried to sketch as likely to ensue if the existing pattern of world trade is allowed to go on unchecked, is exaggerated. Let me quote my own country as an example. Our country of about 50,000 square miles, of which three quarters is still under virgin jungle, peopled by seven million inhabitants, is regarded as an oasis of peace, stability, and prosperity not only in Southeast Asia but in Asia itself. According to figures issued by the IMF for May 1962, our foreign assets amount to US$953 million, equivalent to US$136 per capita, although we depend largely on rubber and tin, which account for something like 80 per cent of our total export income on an average, and although the prices of both commodities are liable to the most violent fluctuations within an incredibly short space of time. Balance of payments difficulties are practically unknown to us up to now. Our per capita gross national product at current market prices of US$261 per annum is the second highest in Asia. As a result, we enjoy one of the highest living standards in that part of the world. In spite of these considerable advantages—and compared to many other developing countries we are in an enviable position—the prospects, even for us, are not as cheerful as they might appear on paper. Natural rubber, which accounts for about 60 per cent of our total export income, is confronted by synthetic rubber, the con- sumption of which is increasing in the Western world while that of natural rubber is steadily decreasing. Our only hope is that the

©International Monetary Fund. Not for Redistribution 172 SUMMARY PROCEEDINGS, 1962 over-all increase in world consumption would make up for the heavy inroads made by synthetic at the expense of natural. There is also the factor of consumption in the Communist countries, which hitherto has made up for the decreasing consumption by the Western countries. Tin is in a slightly happier position because there is no synthetic tin and there are no economic substitutes in sight, and neither can you increase the world supply by the simple expedient of new planting or replanting tin as you do rubber. Even here, however, the American strategic stockpile of tin equivalent to something like two and a half years' consumption for the whole world hangs over us like the sword of Damocles. Like other developing coun- tries, we are trying to industrialize, but here again we have in at least one instance come up against the barrier of export limitation, about which I have already spoken. Like all countries ruled by the parliamentary system of democracy, based on free elections and universal franchise, the government of the day has to show by results that it can increase living standards, if it is to survive. Three factors are, however, causing us serious concern. In the first place, the price of our main export commodity, rubber, is falling steadily for a variety of reasons which I need not go into here, and the long-term indications are that prices will steadily decrease from now on with the result that the level we are likely to obtain by the end of the decade may be only slightly more than half the average level obtaining at the beginning of this decade. Sec- ondly, in spite of this factor, we are trying to accelerate our rate of economic development in order to at least maintain, if not enhance, living standards. Thirdly, the Federation of Malaya should in less than a year's time cease to exist and be replaced by the Federation of Malaysia, which will comprise, in addition to Malaya, Singapore and the three Borneo territories of Sarawak, Brunei, and North Borneo, which are at present British dependencies. Malaysia will mean the creation of a new state of 130,000 square miles and ten million inhabitants. Its long-term potential is reasonably good, as the Borneo territories are even emptier than Malaya and have reasonable agricultural and mineral resources. For the short term, however, the new state will have to undertake

©International Monetary Fund. Not for Redistribution GOVERNOR OF BANK FOR UNITED ARAB REPUBLIC 173 additional and unavoidable commitments in the matter of defense, and it would be politically hazardous to impose additional levels of taxation on the new members of the family in order to bring them up to Malayan ones; having in mind that it is human to want something for nothing, the Borneo territories already expect greater economic development as a result of federation without having to pay for it. The effect of the three factors referred to already, and taken together, has started a drain on our resources—a process which will be continued and indeed accelerated in the coming years, until by 1965 we will be scraping the bottom of the barrel, so to speak. If this is the plight of Malaya, and subsequently the prospect for Malaysia, which has been described by one Washington newspaper as likely to become one of the most viable federations of our time, it can be imagined what is the position of other developing countries which are not so fortunately situated. I have spoken on this subject in order to suggest that a fresh approach is required. If my words can provoke new thinking on an admittedly vast and complex subject, I would suggest that a hopeful start has perhaps been made. . . .

STATEMENT BY THE GOVERNOR OF THE BANK FOR THE UNITED ARAB REPUBLICS

A.M. El Kaissouni

It is with great interest and appreciation that we have read the Annual Reports of the IBRD and its affiliates (the IDA and the IFC) and listened to the enlightening speech of Mr. Black. We have noted with satisfaction that the total loans of these three institutions have set a new record and that these institutions are deeply concerned not only with financial problems but also with the technical and economic problems of planning and of imple- mentation. We hope that this recent record will soon be dwarfed by the continued progress of these institutions and trust that their

5 Delivered at the Second Joint Session, September 20, 1962.

©International Monetary Fund. Not for Redistribution 174 SUMMARY PROCEEDINGS, 1962 technical assistance to member countries will be widened and intensified. We would also like to extend a warm welcome to all the new members who have joined our great institutions, and who will broaden their bases and contribute to their greater effectiveness in the field of international economic cooperation. In the Arab sphere, we would like particularly to welcome Kuwait, who has recently acceded to its independence and has rightly taken its place in the community of nations as an equal and honored partner. The present year has witnessed remarkable international con- sciousness of the growing pains of development in the less developed areas of the world. As a matter of fact, it is not an exaggeration to state that 1962 is the year of recognition for the problems of development. Consciousness and recognition have been intensive and widespread after being sporadic and scattered. Efforts to understand—and search for solutions of—development problems were carried out by UN agencies and committees, by interested groups and institutions, by individual countries on both sides of development, and, probably for the first time, by the less developed countries themselves as a concerted group, when they decided to convene in Cairo last July for the Conference on Problems of Economic Development. Of all the results which were conceived from these activities on the various levels on which they were carried, the most outstanding is the crystallization of development problems and the alternative means to cope with them. If this achievement has prepared the ground for coordinated and systematic action to cope with develop- ment on a realistic and practical basis, then the effort is rewarded. The developing countries have realized with deep concern a growing anxiety that their relative position in the international economic sphere is getting worse as the years go by. Internally, they are facing serious problems of population growth, financing, and technical education, while externally they face even more serious problems of deterioration in the terms of trade, economic blocs, and greater difficulties of access to the large foreign markets. These facts are not only recognized in the less developed countries, but the studies made by the international organizations on these

©International Monetary Fund. Not for Redistribution GOVERNOR OF BANK FOR UNITED ARAB REPUBLIC 175 subjects and by many advanced countries come to the same conclusions. The Annual Report of the Fund this year deals at great length with these problems; and you, Mr. Chairman, have put the matter quite clearly by saying, "With prices of primary commodities persistently weak, the inflow of development capital little more than offsets the weak trend of export earnings," and by saying, "The less developed countries have had an increasingly smaller share of world trade. The trade gap between the industrial countries and the nonindustrial countries is constantly widening." Mr. Black, in his valuable address, speaks also of the adverse factors in the international trade of the developing countries that hinder their development. One difficulty, he says, is created by the trade policies of the industrialized countries. Another—a more serious one—arises from the unfavorable movement in the terms of trade of most of the less developed countries. Then, with typical accuracy, he illustrates the effects of such deterioration in the terms of trade by saying, "In one European country, whose experience is reasonably typical, this swing was sufficient to make the nation's total import bill in 1961 about 8 per cent less than it would have been had 1956 prices still prevailed." Mr. Jacobsson states that it is "the responsibility of the industrial countries to pursue liberal trade policies, opening their markets to imports from less developed areas." I could go on quoting from scientific studies and eminent speakers indefinitely, but it is sufficient to note that the pleas, the facts, and the data which we in the developing countries have on so many previous occasions presented in these meetings of the Bank and Fund, or in other meetings of the United Nations and its specialized agencies, have had at last such a unanimous and heartwarming response. One of our friends in the Cairo Conference once said, "We, in the underdeveloped countries, have to run hard in order to stand still." It would seem to me, however, from a closer scrutiny of the facts and the figures just referred to, that although we are running hard we are, unfortunately, being driven backward.

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Confronted with all these facts and figures and this almost unanimous recognition of the difficulties which face the developing countries, and which are partly due to their own actions and partly due to the actions of the industrialized countries, it is necessary for us to reiterate the urgent need for effective solutions and real remedies. It is also necessary to emphasize that whatever remedies and solutions we may advocate, their effectiveness will only be in their implementation. I am told that the amount of studies and memoranda which have been written by the United Nations and its specialized agencies on problems of development would fill several buildings the size of this one. However, if we may recapitulate the major remedies for the problems of underdevelopment, we would mention: First: That the major task and basic duty lie with the less developed countries themselves. It is for them to see that their finances are in order, that they have a proper and comprehensive program of development compatible with their resources, that they have adequate technical education, efficient managerial administra- tion, and proper exchange rate structure. Second: However, as these countries develop their resources and increase their ability to export, they find it most disheartening that the industrialized countries, which have supplied them with the machinery required to help them to industrialize themselves, are adopting toward their goods a discriminatory policy and are closing the door in front of these goods while leaving it wide open to the exchange of goods of other industrialized countries. Therefore, a much more liberal trade policy should be adopted by the indus- trialized countries toward the new and growing exports of the developing countries. Third: As the terms of trade are constantly shifting against the primary producing countries, it is necessary to stabilize their prices at a relatively remunerative level compared with the prices of the industrial commodities that they import. There are many schemes which have been elaborated by great experts in this connection, and it is necessary to adopt some of these schemes on a large and adequate basis. Fourth: The volume of development finance and development aid given to the developing countries should be greatly increased

©International Monetary Fund. Not for Redistribution GOVERNOR FOR SENEGAL 177 to cope with their pressing needs. We have noted with satisfaction that our institutions have set records of financing in the last year. But we do hope that in the coming years we will see a greater volume of financing. We especially hope that the funds available to IDA will be greatly expanded, so that the ability of our institu- tions to advance loans on easy terms to the developing countries will be greatly increased. Fifth: We would also like to see the proportion of loans granted for industrial development greatly increased. One of the major diffi- culties of the developing countries is that they export primary products, prices of which are constantly falling, while they import industrialized goods, whose prices are constantly rising, and it is necessary in order to alleviate the effect of this deterioration in their terms of international trade to enable them to manufacture some of the industrial goods which they import and even to expand their ability to export such goods. These are some of the recommendations that we consider necessary for the solution of some of the problems of economic development. I feel confident that through our common endeavor and sincere cooperation we will achieve many of them. A great deal has already been done, but much more remains to be done. . . .

STATEMENT BY THE GOVERNOR FOR SENEGAL**

Andre Peytavin

Senegal has but recently achieved political independence. It has had, within a short space of time, to bring into being the administrative machinery and economic organization of a nation responsible for its own affairs and true destiny. This process has proceeded smoothly; it has not given rise to financial difficulties; the budgets have been balanced and have shown surpluses that have served to increase the investments of previous years. Membership of the IMF, IBRD, and its affiliates became at a very early stage one of the objectives of our financial policy. For a

6 Delivered at the Second Joint Session, September 20, 1962.

©International Monetary Fund. Not for Redistribution 178 SUMMARY PROCEEDINGS, 1962 country of modest size, at grips with the problems of economic growth, membership of these four institutions involves a heavy financial sacrifice, but we regard it as our duty to associate our country with international cooperation in the monetary and financial spheres. Generally speaking, the States of Africa have a very keen awareness of the vital need for the solidarity of the human race and for the obligations this imposes. They are therefore specially anxious to show their profound interest in all forms of world cooperation and to take an active part in the work of the great international organizations. Senegal's membership of the IMF should be assessed in terms of the original status of our currency. Quite recently, the Ivory Coast, Dahomey, Upper Volta, Mauritania, Niger, and Senegal decided, by the Treaty of May 12, 1962, to continue their Currency Union with a single issuing institution. Our young States considered that a common currency with a large and assured area of circulation and based on a plurality of economies would represent one of the best ways of securing rapid and harmonious development. We were, therefore, particularly appreciative of the words of approval and encouragement of this kind of Currency Union mentioned by Mr. Jacobsson on Monday. We see in them a promise of success. In entrusting the management of their currency to a Joint Central Bank, which is to be established on November 1 next, our States have agreed to forego part of their currency sovereignty in the inter- ests of the Union. It is a mark of their adherence to a kind of code of good conduct in monetary affairs and a guarantee that the crea- tion of money will not be left uncontrolled to respond solely to the often dangerous and anarchic stimulation of immediate pressures. Nevertheless, each State will maintain the right to a large measure of control in matters affecting the creation of money in its territory to meet its own needs, the grant of credits for currency issues being, in the case of each State, entrusted to a National Monetary Committee making decisions within the framework of general powers delegated to it by the Board of Directors of the Joint Central Bank. Furthermore, under a cooperative agreement binding together all the member republics of the Currency Union and France, the franc of the African Finance Community, i.e., the CFA franc, will continue to be freely exchangeable with the French

©International Monetary Fund. Not for Redistribution GOVERNOR FOR SENEGAL 179 franc at the existing parity and without any limitations. This free convertibility gives the CFA franc the support of a world currency. Although a trade balance has only recently been established in Senegal, it is possible to record an improvement in the sector of external payments. This coverage of imports by exports, which represented 63 per cent in 1960, rose to 80 per cent in 1961. The balance of payments, to the extent that it has been so far possible to supply separate figures for each of the countries of our Currency Union, shows that the position in Senegal is, on the whole, satisfactory. The equilibrium achieved is, moreover, largely due to the bilateral aid received. This balance of payments cannot, however, at the present stage, be regarded as more than an indi- cator, the common currency having precluded an exact analysis of all the factors at play. For the future, all the necessary technical steps have been taken to enable each of the six countries to draw up its own balance and follow its own variations. In any event, the future development of the external payments position of Senegal can be anticipated without pessimism. On the other hand, our country is facing very serious development problems. Although the structure of the Senegalese economy undoubtedly presents considerable variety, it remains insufficiently diversified. Our country possesses a sizable industrial sector with promising prospects of expansion, but the majority of its people remain rural in character and continue to devote themselves too exclusively to the single crop cultivation of the peanut. To guarantee the peanut farmer a profitable selling price, the Government has established the Agricultural Marketing Office, which acts as a kind of marketing board. Nevertheless, the standard of living of the Senegalese farmer remains very poor. National revenues are of the order of CFAF 135 billion for a population of more than three million inhabitants, representing an average annual per capita income of less than CFAF 45,000, or US$180. In the social sector, attendance at schools remains below 30 per cent, and sanitary services are inadequate. We have mobilized the nation and, despite its limited resources, the Government of President Mamadou Dia, since it assumed responsibility in 1957 for the financial affairs of the State, has

©International Monetary Fund. Not for Redistribution 180 SUMMARY PROCEEDINGS, 1962 succeeded, without foreign subsidies, in balancing the national budget, which includes, besides all the operating costs of the public sector, large and constantly increasing expenditure on capital equipment. Thus the percentage of appropriations devoted to investment in relation to the net level of the budget has increased progressively from 9 per cent in 1957 to more than 22 per cent in 1962. Such results have only been achieved through sacrifices made by all of our people, by strict management of public finances, and by bringing into being a feeling for the "mystique du plan!' After two years of continuous work under the guidance of international experts collaborating with representatives of the public and private sectors, the National Assembly has approved the First Four Year Plan covering the 1961-64 period. This voluminous document is a detailed account of the present situation and of the prospects in each sector. It sets, while avoiding over-optimism, a certain number of targets based on both the facts and the practical possibilities; it assumes a gross annual growth rate of 8 per cent for internal production and one of 6.3 per cent for private consump- tion corresponding, after making due allowance for demographic pressures, to a growth rate in the standard of living of 3.5 per cent. Another objective of the Plan is to increase the average rate of investment from 10 per cent in 1960 to 15 per cent in 1964. The realization of the Plan will involve an over-all volume of investment estimated at CFAF 100 billion, i.e., an average annual volume of investment of CFAF 25 billion, corresponding to US$100 million. Twenty per cent of these investments will be in the infrastructure, 13 per cent in the rural economy, 44 per cent in industry and trade, and 23 per cent in projects of a sound character. This program, though relatively modest, represents a significant effort in relation to the country's financial resources. To carry it out, it will be necessary to have recourse to all possible sources of financing. In the forefront of these is private capital, and it is therefore expected that 45 per cent of the funds devoted to the Plan will be obtained from the private sector. Here I would like to stress the close collaboration that exists in Senegal between the public authorities on the one hand and manufacturers and business- men on the other. African socialism, as we understand it, does not

©International Monetary Fund. Not for Redistribution GOVERNOR FOR NEPAL 181 exclude private enterprise but, on the contrary, reserves a very large sector for it, especially in the industrial field. Moreover, our Government has continued to take numerous measures, particularly in respect of taxation and customs, for the purpose of encouraging the investment of private capital. The Investment Code, recently promulgated, adds still further to the advantage offered and makes guarantees with respect to the movements of capital and savings. However important it may be, financing from private sources will be insufficient to meet the needs of our Plan. A large share of public funds will undoubtedly continue to be devoted to it, and we are placing great stock in the contribution to investment in terms of human resources but, at the same time, we have called upon, and we shall again have to call upon, bilateral and multilateral aid. . . .

STATEMENT BY THE GOVERNOR FOR NEPALT

Lakshmi Nath Gautam

It gives me great pleasure to have the opportunity of attending this meeting, the second meeting of these organizations attended by Nepal. I must begin by congratulating the management of the Fund on the effective efforts which they have been making during the past year to stabilize international payments. Some of our fellow members must sometimes wonder, as I do, whether the speculative movements of short-term capital, with their disequili- brating effects on balance of payments positions, do not inhibit the highly industrialized countries from making available more capital for export. When reserves have to be used to counter speculative movements of short-term funds and when restrictive steps have to be taken to correct balance of payments positions, it is possible to appreciate the apprehensions which even the highly industrialized countries may entertain at some time about the export of long-term capital for which the less industrialized coun- tries are clamoring so greatly. In this context, it is heartening to note that positive steps have been taken during the year under review to ensure that nations will take swift cooperative action to 7 Delivered at the Second Joint Session, September 20, 1962.

©International Monetary Fund. Not for Redistribution 182 SUMMARY PROCEEDINGS, 1962 prevent short-term capital movements from intensifying basic deficit positions. It is also encouraging to note the leading part played by the Fund in analyzing these movements and suggesting remedial measures. I personally believe that, if these flights of short-term capital, which by their movements generate the very situation from which they seek to escape, can be brought under control, there will be created an environment in which the more highly indus- trialized nations will be prompted to increase their lending facilities, the use of which is so urgently required by all developing nations. The Report of the Fund's activities also seems to suggest that, provided the speculative element in world finance can be cured, there will follow greater hope of stability in world trade. Certain pressing problems of some of the developing countries are connected with trade patterns and difficulties of obtaining convertible currency for goods and services exported. We, however, hope that proper appraisal of such national problems on an international basis by the IMF will help us solve them. It is also encouraging to read in the latest Report that the Fund, which was conceived to tackle the problem of liquidity and exchange stability, has been able to go ahead quite smoothly, and we are confident that the progress will be accelerated in the future.

STATEMENT BY THE GOVERNOR OF THE BANK FOR COLOMBIA8

Carlos Sanz de Santamaria

It has been the custom for the group of Governors from the Latin American countries to meet during the Annual Meetings of the Fund and Bank to talk about common problems and analyze the effects of the action of these great international institutions on the development of their countries and on the process of their economic activity. This year, as in the preceding years, this group has met It did me the honor of appointing me its Chairman, and that is

8 Delivered at the Closing Joint Session, September 21, 1962.

©International Monetary Fund. Not for Redistribution GOVERNOR OF BANK FOR COLOMBIA 183 why I am speaking before you here in the name of the Latin American delegation. . . . In the brief statement I wish to make here, I should like to point out that Mr. Jacobsson's excellent speech stimulates optimism, because it shows clear and precise progress in the international monetary system and in the relations of the countries which have through history created the greatest volume of international capital. The dollar, the mark, the franc, the pound, the guilder, and all the other convertible currencies have a strength and a balanced inter- relation which warrants the expectation of a stable, strong period in the monetary system within which our nations operate. It is stimulating to note also, both in Mr. Jacobsson's and in Mr. Black's speech, that both are devoting special attention to the serious problem of the underdeveloped countries, which form the majority of mankind. The sole fact that the Fund and the Bank have the solution of the problems of these countries as the main point of study for their future action is very promising and guaran- tees that the measures adopted thus far—many of which have been very effective for promoting an increase in the standard of living of countries in an early stage of development—will be supplemented in the future by new systems and will be given additional means for accelerating the process of economic development. . . . The largest economic problem which our countries are facing today is the deterioration of the terms of trade. If 1953 is taken as the base of 100, the terms of trade indicate that from then on the countries of Western Europe which have made a recovery, the United States, and some countries of other areas have obtained great advantages. Their present index would range between 105 and 110, while the indexes of Latin America, taken as a whole, have undergone a considerable decrease, represented by the figure 83. Although these figures show the Governors the seriousness of the process for the backward area of our continent, some objective examples taken from the case of Colombia give striking emphasis to this phenomenon, which is very similar to that observed in other countries of the region whose principal source of foreign exchange is coffee. In 1954 we had to pay 19 bags of coffee for an automobile.

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In 1962 it takes 32 bags to buy an automobile. In 1954 we bought a jeep with 14 bags. Today it costs 39. In 1954 we could buy a typewriter with one bag of coffee. Now we need one and a half. In 1954 we could buy a ton of newsprint with two bags of coffee. In 1962 we have to give three and a half. Finally, to buy a medium tractor in 1950 it was necessary to sell 131 bags of coffee. Today a tractor costs 295 bags, i.e., the price has increased 225 per cent. . . . The best cooperation that the developed countries can render to the countries which are still not in an advanced stage of indus- trialization is to promote higher earnings for the latter's exports of raw materials, and even for the manufactures of their infant industries, and to supply—in addition to normal credits for specific projects—temporary aid for the purchase of intermediate goods— basically aid which no advocate of orthodoxy likes to hear of: "balance of payments credits." However, these credits are essential during the period of implementation of economic development programs, while the infant economies now based on the export of one or several products are being transformed into diversified economies. We call on the Governors of the European countries and those who represent other areas to conduct a campaign to open the doors of their trade to Latin American products in increasing volume; to transform the aid they are now giving countries with which they have had special political and economic relations into new forms which would eliminate discrimination; to modify internal taxes substantially and reduce customs tariffs for Latin American prod- ucts. The elimination of all these obstacles to trade in our exports would be a good aid for the intensification of trade, for the economic development of our countries, and for contributing to full employment in the developed countries. If we have more foreign exchange because we sell more or at a better price, we shall be in a position to buy equipment and manufactured articles from them in larger volume. Many important steps are being taken to improve trade relations between the various countries. There is a better understanding on the part of the advanced countries of the needs of the backward

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countries and of the right proportion of mutual obligations. But we are still far from the goals which we must reach. Economic instability entails social instability, and with it comes political instability. Surely there are bases for arriving at stability and equilibrium in Latin America. In spite of having lost up to 50 per cent of its foreign exchange earnings from exports of raw materials in the period from 1954 to 1962, in spite of having felt the impact of the higher costs of its imports because of the price increase in industrialized countries, and in spite of the increase of 30 per cent in its population and hence in its needs, Latin America still has the vigorous momentum for planning its development and has lost neither its faith nor its will to progress. If after our development programs are completed and the necessary effort has been made at home for the essential portion which our people must provide, we can count on appropriate and timely support from the more industrialized countries and interna- tional institutions, the countries of Latin America will have stable, advanced economies in a few years, and will become wide markets for the fully industrialized nations. After having concluded these observations which I wrote yester- day, following the meeting of the Latin American group, the group had an opportunity to hear an extremely important statement by Mr. Jacobsson, who addressed himself to our Latin American group. There we were able to appreciate the tremendous progress made by the Fund with regard to the understanding study of our problems. He spoke of the interest of an indirect type which the Fund would have and the interest with which it would follow the study of consortia groups designed to help underdeveloped countries and of the compensatory funds to permit elimination of fluctuations of raw materials exports of our countries. The interest of the Fund in these two vital aspects for under- developed countries stimulated our interest. I did not wish to let this occasion pass without expressing to Mr. Jacobsson and to the Fund our great gratitude for these new ideas and these new interests on our behalf and on behalf of the underdeveloped countries.

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©International Monetary Fund. Not for Redistribution COMMITTEES' REPORTS

and

RESOLUTIONS OF THE BOARD OF GOVERNORS

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©International Monetary Fund. Not for Redistribution REPORTS OF THE PROCEDURES COMMITTEES Chairman Saudi Arabia

Vice Chairman Chile

Reporting Member Italy

Other Members: Burma, Canada, China, Costa Rica, Ecuador, Finland, France, Germany, India, Japan, Netherlands, Nigeria, Tunisia, United Arab Republic, United Kingdom, and United States

Report I1 September 15, 1962

Mr. Chairman:

The Procedures Committees of the Fund and Bank, the Corpora- tion, and the Association, meeting jointly on Saturday, Sep- tember 15, 1962, considered the matters of business which had been proposed for the 1962 Annual Meetings of the Boards of Governors. I have the honor to submit the following report and recom- mendations:

1. Schedule of Meetings It is recommended that the provisional schedule set forth in Joint Document No. 1 [Annex I] be adopted, and that the Secre- 1 The Report was adopted by the Boards of Governors of the Fund, the Bank, IFC, and IDA, in Joint Session, on September 17, 1962. 189

©International Monetary Fund. Not for Redistribution 190 SUMMARY PROCEEDINGS, 1962 taries, in consultation with the Chairman, be authorized to change it as necessary.

2. Conduct of Meetings It is recommended that the provisions relating to the conduct of the Meetings, as contained in Joint Document No. 2 [Annex II], be approved.

3. Agendas It is recommended that the agendas set forth in Fund Document No. 1 [Annex III], Bank Document No. 1, IFC Document No. 1, and IDA Document No. 1 be adopted by the respective Boards of Governors and that proposed additions to any agenda be submitted in writing through the Secretaries to the Procedures Committees for their recommendations.

4. Elections of Executive Directors The Committees considered the reports of the Executive Direc- tors of the Fund and Bank regarding the Elections of Executive Directors set forth in Fund Document No. 17 [Annex IV] and Bank Document No. 17. The Committees recommend the adoption of the draft resolutions attached to these Reports.

5. Later Reports The Committees also considered the other individual items of business on the proposed agendas of the Fund, Bank, IFC, and IDA, and will make recommendations as to their disposition in separate reports. The report concerning Bank, IFC, and IDA matters will be presented at the meeting on Tuesday morning. The report on matters concerning the Fund will be presented at the meeting on Wednesday morning.

©International Monetary Fund. Not for Redistribution REPORTS OF PROCEDURES COMMITTEES 191 The Committees will report later on:

a. Place and Date of 1963 and 1964 Annual Meetings. b. Election of OflBcers and Procedures Committees for 1962-63.

Approved:

/s/ A. Z. SAAD /s/ SERGIO SIGLIENTI (Saudi Arabia) (Italy) Chairman Reporting Member

/s/ FERNANDO MAIRA (Chile) Vice Chairman

Annex I to Report I

SCHEDULE OF MEETINGS

Monday, September 17 10:00 A.M. Joint Boards Address by Chairman Procedures Committees Report I Annual Address, Managing Direc- tor of IMF

Tuesday, September 18 10:00 A.M. IBRD, IFC, and IDA Boards Annual Address, President of IBRD, IFC, and IDA Procedures Committees Report II Annual Discussion

3:00 P.M. IBRD, IFC, and IDA Boards Annual Discussion (cont.)

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Wednesday, September 19 10:00 A.M. IMF Board Procedures Committees Report III Annual Discussion

3:00 P.M. IMF Board Annual Discussion (cont.)

Thursday, September 20 10:00 A.M. Procedures Committees

11:00 A.M. Joint Boards Address by the President of the United States IMF Election of Executive Direc- tors IBRD Election of Executive Directors IBRD, IFC, and IDA Annual Discussion (cont.) IMF Annual Discussion (cont.)

Friday, September 21 10:00 A.M. Joint Boards Procedures Committees Report IV Comments by Heads of Organi- zations Concluding Remarks Adjournment by Chairman

©International Monetary Fund. Not for Redistribution REPORTS OF PROCEDURES COMMITTEES 193

Annex II to Report I

PROVISIONS RELATING TO THE CONDUCT OF THE MEETINGS

Attendance 1. Sessions of the full Boards of Governors of the Fund, the Bank, the Corporation and the Association, including joint sessions, shall be open to accredited observers, the press and invited guests. 2. Meetings of the Procedures Committees shall be open only to Governors who are members of the Committees and their advisers. 3. Sessions of the Boards of Governors and meetings of the Procedures Committees shall be open to Secretariat and technical staff as may be necessary.

Public Information 4. The Chairman of the Boards of Governors, the Managing Director of the Fund and the President of the Bank are authorized to communicate to the press such information concerning the proceedings of the Annual Meetings as they may deem suitable. Copies of such communications shall be available to any Governor on his request.

Procedure and Records 5. The Chairman of the Boards of Governors will establish the order of speaking at each Session. 6. The Secretaries will prepare verbatim transcripts of the proceed- ings of sessions of the Boards of Governors and the Pro- cedures Committees. The transcripts of committee proceedings, and any summary records thereof, will be confidential and available only to the Chairman, the Managing Director of the Fund, the President of the Bank, and the Secretaries. 7. Reports of the Procedures Committees shall be signed by the respective Committee Chairmen and Reporting Members.

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Annex HI to Report I

AGENDA

1. 1962 Annual Report 2. Financial Statements and Audit Report (Appendix IX of 1962 Annual Report and Fund Documents Nos. 2 and 3) 3. Administrative Budget for Fiscal Year Ending April 30, 1963 (Appendix VII of 1962 Annual Report and Fund Documents Nos. 3 and 4) 4. General Reserve (Fund Document No. 5) 5. Changes in Rules and Regulations (Fund Document No. 6) 6. Applications for Membership a. Cameroon (Fund Document No. 7) b. Central African Republic (Fund Document No. 8) c. Chad (Fund Document No. 9) d. Congo (Brazzaville) (Fund Document No. 10) e. Gabon (Fund Document No. 11) f. Guinea (Fund Document No. 12) g. Ivory Coast (Fund Document No. 13) h. Jamaica (Fund Document No. 14) i. Niger (Fund Document No. 15) j. Upper Volta (Fund Document No. 16) k. Dahomey (Fund Document No. 19)2 7. 1962 Regular Election of Executive Directors (Fund Document No. 17) 8. Place and Date of 1963 and 1964 Annual Meetings 9. Election of Officers and Procedures Committee for 1962-63

2 Item added on September 21, 1962; see Report IV, page 215.

©International Monetary Fund. Not for Redistribution REPORTS OF PROCEDURES COMMITTEES 195

Annex IV to Report I

1962 REGULAR ELECTION OF EXECUTIVE DIRECTORS

September 15, 1962

Dear Mr. Chairman:

At the 1962 Annual Meeting it will be necessary for the Board of Governors to adopt Rules for the Conduct of the 1962 Regular Election of Executive Directors. Submitted herewith for the consideration of the Board of Governors are: 1. Report of the Executive Directors to the Board of Governors regarding the Election of Executive Directors. 2. Proposed Resolution regarding an Interim Election.3 3. Proposed Rules for the Conduct of the 1962 Regular Election. 4. Proposed Resolution regarding the 1962 Regular Election.4

Yours very truly, /s/ PER JACOBSSON Managing Director and Chairman of the Executive Board

Chairman of the Board of Governors 1962 Annual Meeting International Monetary Fund

3 Resolution No. 17-5; see page 228. * Resolution No. 17-6; see page 229.

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Report of the Executive Directors to the Board of Governors

Election of Executive Dkectors

1. Section 3(d) of Article XII of the Articles of Agreement of the Fund provides that elections of Executive Directors shall be conducted at intervals of two years. The 1960 Regular Election of Executive Directors was held at the Fifteenth Annual Meeting of the Board of Governors in September 1960. 2. Section 3(b) of Article XII provides that there shall not be less than twelve Executive Directors, of whom (i) five shall be appointed by the five members having the largest quotas; (ii) not more than two shall be appointed when the provisions of Article XII, Section 3(c) apply; (iii) five shall be elected by the members not entitled to appoint Directors, other than the American Republics; and (iv) two shall be elected by the American Republics not entitled to appoint Directors. 3. It is further provided in Section 3(b) that, "When governments of other countries become members, the Board of Governors may, by a four-fifths majority of the total voting power, increase the number of Directors to be elected." 4. The Executive Directors have noted that at the 1958 Regular Election the number of Executive Dkectors was increased to the present total of 18. Of this number five are presently appointed under Article XII, Section 3(b) (i) by the five mem- bers having the largest quotas; ten are elected under Section 3(b) (iii) by members other than the American Republics; and three are elected under Section 3(b) (iv) by the American Republics. It was also noted that in the 1962 Regular Election no member not already entitled to appoint an Executive Dkec- tor will be entitled to appoint an Executive Director pursuant to Article XII, Section 3(c).

©International Monetary Fund. Not for Redistribution REPORTS OF PROCEDURES COMMITTEES 197 5. Since the last increase in the total number of Executive Directors at the 1958 Regular Election, the Executive Directors noted that the following members have been admitted with a combined voting strength of 7,135: Cyprus 362 Kuwait 750 Laos 325 Liberia 362 Nepal 325 New Zealand 1,500 Nigeria 750 Portugal 850 Senegal 325 Sierra Leone 362 Somalia 362 Tanganyika 500 Togo 362

7,135 Applications from Burundi, Cameroon, Central African Repub- lic, Chad, Congo (Brazzaville), Congo (Leopoldville), Dahomey, Gabon, Guinea, Ivory Coast, Jamaica, Malagasy Republic, Mali, Niger, Rwanda, Trinidad and Tobago, and Upper Volta are in various stages of the process toward membership. 6. The Executive Directors considered the possibility that some of these applicant countries may become members after the 1962 Regular Election and before the 1964 Regular Election. This possible increase in membership, together with the increase in membership that has occurred since the last addition to the number of Executive Directors, in their opinion warrants the making of arrangements to increase at an appropriate time the number of Directors to be elected under Article XII, Section 3(b) (iii). 7. In view of the foregoing, the Executive Directors recommend that an interim election be authorized to elect an additional Executive Director, who shall hold office until the 1964 Regular Election, if before September 16, 1963 there shall

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have been admitted to membership, since the last addition to the total number of Executive Directors, countries having votes totalling at least 8,000. 8. With regard to the rules for the conduct of the 1962 Regular Election, in the light of the foregoing considerations the Executive Directors see no reason to propose any change of substance in the Election Rules as they were applied to the 1960 Regular Election, except to lower the minimum per- centage to 8 in respect of the election under Article XII, Section 3(b) (iii). Accordingly, the Committee recommends that in the 1962 Regular Election ten Directors be elected under Article XII, Section 3(b) (iii); the maximum and mini- mum percentages of eligible votes required for their election should be 13 and 8 per cent, respectively, and for the three Executive Directors elected under Article XII, Section 3(b) (iv), 38 and 28 per cent, respectively. 9. It is also recommended that the effective date of the 1962 Regular Election be November 1, 1962.

Proposed Rules for the Conduct of the 1962 Regular Election of Executive Directors of the Fund 1. Definitions: In these Rules, unless the context shall otherwise require: (a) "Articles" means the Articles of Agreement of the Fund. (b) "Board" means the Board of Governors of the Fund. (c) "Chairman" means the Chairman of the Board or a Vice Chairman acting as Chairman. (d) "Governor" includes the Alternate Governor or any temporary Alternate Governor when acting for the Governor. (e) "Secretary" means the Secretary or any acting Secretary of the Fund. (f) "Election" means the 1962 Regular Election of Executive Directors.

©International Monetary Fund. Not for Redistribution REPORTS OF PROCEDURES COMMITTEES 199 2. Dale of Election: The election shall be held during the 1962 Annual Meeting at a time to be fixed by the Board. 3. Basic Rules—Schedule C: Subject to the adjustments set forth herein, the provisions of Schedule C of the Articles shall apply to the conduct of the election. 4. Executive Directors to Be Elected Under Article XII, Section 3(b)(iii): (a) Ten Executive Directors shall be elected under Arti- cle XII, Section 3(b)(iii). (b) In view of the number of Executive Directors to be elected under Article XII, Section 3(b)(iii): (i) Eight per cent shall be substituted for "nineteen per cent" in paragraphs 2 and 5 of Schedule C. (ii) Thirteen per cent shall be substituted for "twenty per cent" in paragraphs 3, 4 and 5 of Schedule C. 5. Executive Directors to Be Elected Under Article XII, Section 3(b)(iv): Three Executive Directors shall be elected under Article XII, Section 3(b) (iv): and (a) The minimum percentage of the eligible votes required for election under this subparagraph shall be twenty-eight per cent. (b) The maximum percentage of eligible votes for any one nominee for the purposes of paragraph 13 below shall be thirty-eight per cent. 6. Nominations: (a) Any person nominated by one or more Governors entitled to vote in the election shall be eligible for election as Executive Director. (b) Each nomination shall be made on a Nomination Form furnished by the Secretary, signed by the Governor or Governors making the nomination and deposited with the Secretary. (c) A Governor may nominate only one person.

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(d) Nominations may be made until 12 o'clock noon on the day before the day on which the election is scheduled to be held. The Secretary shall post and distribute a list of the persons nominated. 7. Supervision of the Election: The Chairman shall appoint such tellers and other assistants and take such other action as he deems necessary for the conduct of the election. 8. Ballots: One ballot form shall be furnished before a ballot is taken to each Governor entitled to vote. On any particular ballot only ballot forms distributed for that ballot shall be counted. 9. Balloting—Order: The first ballot shall be simultaneous ballot- ing of all the Governors entitled to participate in the election of Executive Directors under Article XII, Section 3(b) (iii), and all of the American Republics entitled to participate in the election of Executive Directors under Article XII, Section 3(b) (iv). The balloting for the Executive Directors elected under Article XII, Section 3(b) (iii), shall then be concluded before any further ballots are taken for the Executive Directors to be elected by the American Republics. 10. Balloting—General: Each ballot shall be taken as follows: (a) The roll of members whose Governors are entitled to vote shall be called in alphabetical order. After a mem- ber's name is called the Governor for such member shall deposit his signed ballot in the ballot box. (b) When a ballot shall have been completed, the Chairman shall cause the ballots to be counted and shall announce the names of the persons elected before the end of the session at which the election is held. If a succeeding ballot is necessary, the Chairman shall announce the names of the nominees to be voted on and the members whose Governors are entitled to vote. (c) If the tellers shall be of the opinion that any particular ballot form is not properly executed, they shall, if possible, afford the Governor concerned an opportunity

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to correct it before tallying the results; and such ballot form if so corrected, shall be deemed valid. 11. Balloting and Election of Executive Directors Under Article XII, Section 3(b) (Hi): (a) When on any ballot the number of nominees shall not exceed the number of Executive Directors to be elected, each nominee shall be deemed to be elected by the number of votes received by him on such ballot; provided, however, that if on such ballot the votes of any Governor shall be deemed under paragraph 4 of Schedule C to have raised the votes cast for any nominee above 13 per cent of the eligible votes, no nominee shall be deemed to have been elected who shall not have received on such ballot a minimum of 8 per cent of the eligible votes and a succeeding ballot shall be taken for which any nominee not elected shall be eligible. (b) If, as a result of the first ballot, the number of Executive Directors to be elected in accordance with paragraph 4 above shall not have been elected, a second and, if necessary, further ballots shall be taken. The Governors entitled to vote on such succeeding ballots shall be only (i) those Governors who voted on the preceding ballot for any nominee not elected, and (ii) those Governors whose votes for a nominee elected on the preceding ballot are deemed under paragraph 4 of Schedule C to have raised the votes cast for such nominee above 13 per cent of the eligible votes. (c) The votes of a Governor shall not be deemed under paragraph 4 of Schedule C to have raised the total votes for a nominee above 13 per cent of the eligible votes if without the votes of such Governor such total would be more than 8 per cent but not more than 13 per cent of the eligible votes. (d) If on any ballot two or more Governors having an equal number of votes shall have voted for the same nominee and the votes of one or more, but not all, of such

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Governors could be deemed under paragraph 4 of Schedule C to have raised the total votes received by such nominee above 13 per cent of the eligible votes, the Chairman shall determine by lot the Governor or Governors, as the case may be, who shall be entitled to vote on the next ballot. (e) If a Governor shall abstain from voting on any ballot taken under Article XII, Section 3(b)(iii), he shall not be entitled to vote on any subsequent ballot and his votes shall not be counted within the meaning of Article XII, Section 3(i), toward the election of any Executive Director; provided, however, that if such abstention shall have first occurred on the last of several ballots, the votes of such Governor shall be deemed to have been cast for the election of the Executive Director elected on such ballot by the least number of votes. If at the time and place of any ballot a member shall not be repre- sented by a Governor, such member and its Governor, if any, shall be deemed to have abstained from voting on that ballot. 12. Election of Executive Directors Under Article XII, Section 3(b) (iv): These Rules supplement paragraph 7 of Schedule C. (a) Each Governor eligible to participate in the election shall cast for one person all the votes to which he is entitled. (b) The three nominees receiving the greatest number of votes shall be elected, provided that no nominee shall be elected who receives less than twenty-eight per cent of the eligible votes. The person elected with the least number of votes cast for the three elected nominees shall be deemed to have been elected by all the votes cast for him, all the votes not cast in the ballot through abstention from voting and all those cast for such other nominee or nominees as were not elected. (c) When on any ballot two or more Executive Directors remain to be elected and there are the same number of

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nominees, each nominee shall be elected by the number of votes received by him; provided, that if the votes of any Governor shall be deemed to have raised the votes cast for any nominee above thirty-eight per cent of the eligible votes, no nominee shall be elected on that ballot who shall not have received twenty-eight per cent of the eligible votes and a succeeding ballot shall be taken for which any nominee not elected on the preceding ballot shall be eligible. 13. Succeeding Ballots for Election of Executive Directors Under Article XII, Section 3(b) (iv): (a) If, as a result of the first ballot, the number of Executive Directors to be elected in accordance with paragraph 5 above shall not have been elected, a second and, if necessary, further ballots shall be taken. The Governors entitled to vote on such succeeding ballots shall be only (i) those Governors who voted on the preceding ballot for any nominee not elected or who abstained from voting on the preceding ballot and (ii) those Governors whose votes for a nominee elected on the preceding ballot are deemed to have raised the votes cast for such nominee above thirty-eight per cent of the eligible votes. In determining whether the votes cast by a Governor are to be deemed to have raised the total of any nominee above thirty-eight per cent of the eligible votes, the thirty-eight per cent shall be deemed to include, first, the votes of the Governor casting the largest number of votes for such nominee, then the votes of the Governor casting the next largest number of votes and so on until thirty-eight per cent is reached. (b) The votes of a Governor under subparagraph (a) above shall not be deemed to have raised the total votes for a nominee above thirty-eight per cent of the eligible votes if without the votes of such Governor such total would be more than twenty-eight per cent but not more than thirty-eight per cent of the eligible votes.

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(c) If on any ballot two or more Governors having an equal number of votes shall have voted for the same nominee and the votes of one or more, but not all of such Governors, could be deemed under subparagraph (a) above to have raised the total votes received by such nominee above thirty-eight per cent of the eligible votes, the Chairman shall determine by lot the Governor or Governors, as the case may be, who shall be entitled to vote on the next ballot. 14. Elimination of Nominees: If on any ballot two or more nominees shall receive the lowest number of votes, no nomi- nee shall be dropped from the next succeeding ballot, but if the same situation is repeated on such succeeding ballot, the Chairman shall eliminate by lot one of the nominees from the following ballot. 15. Announcement of Result: After the last ballot the Chairman shall cause to be distributed a statement setting forth the result of the election. 16. Effective Date of Election of Executive Directors: The effective date of election shall be November 1, 1962. Incumbent elected Executive Directors shall serve through the day preceding such date. 17. General: Any question arising in connection with the conduct of the election shall be resolved by the tellers, subject to appeal, at the request of any Governor, to the Chairman and from him to the Board. Whenever possible, any such ques- tion shall be put without identifying the members or Gover- nors concerned.

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STATEMENT OF RESULTS OF 1962 REGULAR ELECTION OF EXECUTIVE DIRECTORS, SEPTEMBER 20, 1962

Candidates Elected Under Article XII, Section 3(b) (iii)

Members Whose Votes Counted Number of Candidate Elected Toward Election Votes John M. Garland Australia 4,250 (Australia) New Zealand 1,500 South Africa 1,750 Viet-Nam 435 7,935

Pieter Lieftinck Cyprus 362 (Netherlands) Israel 500 Netherlands 4,375 Yugoslavia 1,450 6,687

A. F. W. Plumptre Canada 5,750 (Canada) Ireland 700 6,450

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Candidates Elected Under Article XII, Section 3(b)(iii)—cont.

Members Whose Votes Counted Number of Candidate Elected Toward Election Votes Ahmed Zaki Saad Afghanistan 475 (United Arab Ethiopia 382 Republic) Iran 950 Iraq 400 Jordan 329 Kuwait 750 Lebanon 317 Pakistan 1,750 Philippines 1,000 Saudi Arabia 800 Sudan 400 Syrian Arab Republic 400 United Arab Republic 1,150 9,103

Sergio Siglienti Greece 850 (Italy) Italy 2,950 Portugal 850 Spain 1,750 6,400

Karl Skjaeveland Denmark 1,550 (Norway) Finland 820 Iceland 362 Norway 1,250 Sweden 1,750 5,732

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Candidates Elected Under Article XII, Section 3(b) (iii)—concl.

Members Whose Votes Counted Number of Candidate Elected Toward Election Votes Sumanang Ghana 600 (Indonesia) Indonesia 1,900 Laos 325 Libya 380 Malaya 575 Morocco 775 Tunisia 433 4,988

Gengo Suzuki Burma 550 (Japan) Ceylon 700 Japan 5,250 Nepal 325 Thailand 700 7^525 Beue Tann (China) China 5,750

Andre van Campenhout Austria 1,000 (Belgium) Belgium 3,625 Korea 437 Luxembourg 370 Turkey 1,110 6,542

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Candidates Elected Under Article XII, Section 3(b)(iv)

Members Whose Votes Counted Number of Candidate Elected Toward Election Votes Mauricio Chagas Bicalho Brazil 3,050 (Brazil) Colombia 1,250 Dominican Republic 400 Haiti 362 Panama 255 Peru 575 5,892

Guillermo Walter Klein Argentina 3,050 (Argentina) Bolivia 475 Chile 1,250 Ecuador 400 Paraguay 362 Uruguay 550 6,087

Praxedes Reina Costa Rica 400 Hermosillo (Mexico) Cuba 750 El Salvador 362 Guatemala 400 Honduras 362 Mexico 2,050 Nicaragua 362 Venezuela 1,750 6,436

/s/ Erik Brofoss /s/ Jorge Bueso Arias (Norway) (Honduras) Teller Teller

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Report III1 September 15, 1962

Mr. Chairman:

At the joint meeting of the Procedures Committees held on September 15, 1962, the matters of business on the agenda of the Board of Governors of the Fund were considered. I have the honor to submit the following report and recom- mendations:

1. Annual Report The Committee noted that provision has been made for the annual discussion of the business of the Fund at this meeting.

2. Financial Statements, Report on Audit, and Administrative Budget The Committee considered the Report on Audit for the Fiscal Year ended April 30, 1962, the Financial Statements contained therein (Fund Document No. 2 and Appendix IX of the 1962 Annual Report), and the Administrative Budget for the Fiscal Year ending April 30, 1963 (Appendix VII of the Annual Report and Fund Document No. 4). The Committee recommends to the Board of Governors the adoption of the draft resolution set forth in Fund Document No. 3.2

3. General Reserve The Committee also considered the recommendation of the Executive Directors with respect to the allocation to the General 1 Report II dealt with the business of the Boards of Governors of the Bank, IFC, and IDA. Report III and the Resolutions recommended therein were adopted by the Board of Governors of the Fund on September 19, 1962. 2 Resolution No. 17-7; see page 229.

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Reserve of the Fund's net income for the Fiscal Year ended April 30, 1962 [Annex I]. The Committee recommends that the Board of Governors adopt the draft resolution contained in Fund Document No. 5.3

4. Rules and Regulations The Committee reviewed the amendments to Rule B-8 and to Rules 1-2 and 1-4(f) of the Rules and Regulations as submitted by the Executive Directors [Annex II] and recommends adoption by the Board of Governors of the draft resolution set forth in Fund Document No. 6.4

5. Applications for Membership The Committee considered the recommendations of the Executive Directors concerning the applications by Cameroon, Central African Republic, Chad, Congo (Brazzaville), Gabon, Guinea, Ivory Coast, Jamaica, Niger, and Upper Volta for membership in the Fund [Annex III] and recommends the adoption by the Board of Governors of the draft resolutions set forth in Fund Documents No. 7 through No. 16.5

Approved: /s/ A. Z. SAAD /s/ SERGIO SIGLIENTI (Saudi Arabia) (Italy) Chairman Reporting Member

3 Resolution No. 17-8; see page 229. 4 Resolution No. 17-9; see page 230. 5 Resolutions No. 17-10 through No. 17-19; see pages 230-58.

©International Monetary Fund. Not for Redistribution REPORTS OF PROCEDURES COMMITTEES 211 Annex I to Report III

September 15, 1962

Dear Mr. Chairman:

For the fiscal year ended April 30, 1962, the Fund had net income of $24,950,966.38. Under the Articles of Agreement it must be determined annually what part of the Fund's income shall be placed to reserve and what part, if any, shall be distributed. At the Sixteenth Annual Meeting, the Board of Governors approved the allocation to the General Reserve of the net income for the fiscal year ended April 30, 1961 (Resolution No. 16-6). Pursuant to the decision taken by the Executive Board on April 14, 1958, the net income of the Fund subsequent to April 30, 1961 has been transferred provisionally at the end of each month to the General Reserve. The total amount thus transferred for the fiscal year ended April 30, 1962 is $24,950,966.38. The Executive Directors recommend that the Board of Governors adopt the attached draft resolution6 approving this allocation to the General Reserve.

Yours very truly, A/ PER JACOBSSON Managing Director and Chairman of the Executive Board

Chairman of the Board of Governors 1962 Annual Meeting International Monetary Fund

6 Resolution No. 17-8; see page 229.

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Annex II to Report III

September 15, 1962

Dear Mr. Chairman:

In accordance with Section 16 of the By-Laws, the attached amendments to the Rules and Regulations are submitted for review by the Board of Governors. On October 27, 1961, Rule B-8 was amended to provide that when a Fund holiday falls on Saturday the preceding Friday will be observed. On April 25, 1962, Rules 1-2 and 1-4(f) were amended to extend until April 30, 1963, the then prevailing service charge on transactions and charges on the Fund's holdings of member currencies in excess of quotas. These rules as last amended are set forth in Attachment 1. A proposed Resolution for consideration by the Board of Governors is attached.7 The Executive Directors have made no other changes in the Rules and Regulations since the last Annual Meeting.

Yours very truly, /s/ PER JACOBSSON Managing Director and Chairman of the Executive Board

Chairman of the Board of Governors 1962 Annual Meeting International Monetary Fund

Resolution No. 17-9; see page 230.

©International Monetary Fund. Not for Redistribution REPORTS OF PROCEDURES COMMITTEES 213 Attachment 1. Amendments to the Rules and Regulations Since the Sixteenth Annual Meeting Rule B-8. Text as amended on October 27, 1961: Business day1 refers to the normal working hours of the Fund, 9:00 a.m. to 5:30 p.m. at the official time for the District of Columbia, on Monday through Friday of each week with the following exceptions (which will include the preceding Friday whenever one of the dates below falls on a Saturday and the following Monday whenever one falls on a Sunday): January 1 February 22 May 30 July 4 First Monday in September November 11 Fourth Thursday in November December 25

1 The definition of "business day" does not affect in any way the arrangements which have been made for the receipt of messages at all times and for prompt action upon them as required by circumstances and the Fund Agreement, By-Laws and Rules and Regulations.

Rule 1-2. Text as amended on April 25, 1962: The service charge payable by a member buying the currency of another member in exchange for its own currency shall be paid at the time the transaction is consummated. The service charge payable for such transactions taking place from Decem- ber 1, 1951 through April 30, 1963, shall be i of 1 per cent. Rule 1-4(f). Text as amended on April 25, 1962: With respect to each segment of the holdings of a member's currency to the extent that it represents the acquisition of that currency by the Fund from January 1, 1954 through April 30, 1963: (i) The charge to be levied on each segment to the extent that it is within the first bracket of 50 per cent in excess

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of the quota shall be nil for the first three months, 2 per cent per annum for the next fifteen months, and an additional i per cent per annum for each subsequent six months. (ii) The charge to be levied on each segment to the extent that it is within the second bracket of more than 50 per cent and not more than 75 per cent in excess of the quota shall be nil for the first three months, 2 per cent per annum for the next nine months, and an additional i per cent per annum for each subsequent six months. (iii) The charge to be levied on each segment to the extent that is within the third bracket of more than 75 per cent and not more than 100 per cent in excess of the quota shall be nil for the first three months, 2 per cent per annum for the next three months, and an additional i per cent per annum for each subsequent six months.

Annex HI to Report III

September 15, 1962 Dear Mr. Chairman:

I am transmitting herewith on behalf of the Executive Directors a draft resolution,8 which is recommended for adoption by the Board of Governors, on the admission of the Federal Republic of Cameroon to membership in the Fund. Yours very tnily, A/ PER JACOBSSON Managing Director and Chairman of the Executive Board

Chairman of the Board of Governors 1962 Annual Meeting International Monetary Fund

8 Resolution No. 17-10; see page 230.

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NOTE

Letters in identical terms to the above, except for the name of the country, were sent on the same date recommending the admission of the following: Central African Republic (Resolution No. 17-11; see page 233) Republic of Chad (Resolution No. 17-12; see page 236) Republic of the Congo (Brazzaville) (Resolution No. 17-13; see page 239) Republic of Gabon (Resolution No. 17-14; see page 242) Republic of Guinea (Resolution No. 17-15; see page 245) Republic of the Ivory Coast (Resolution No. 17-16; see page 248) Jamaica (Resolution No. 17-17; see page 250) Republic of Niger (Resolution No. 17-18; see page 253) Upper Volta (Resolution No. 17-19; see page 255)

Report IV1

September 20, 1962

Mr. Chairman:

I have the honor to submit the following report of the meeting of the Procedures Committees held on September 20:

1. Membership of Dahomey The Committees considered the reports of the Executive Direc- tors of the Fund [Annex I], Bank and IDA, dated September 18, 1962, concerning the applications of Dahomey for membership

iThe Report was adopted by the Boards of Governors of the Fund, the Bank, IFC, and IDA, in Joint Session, on September 21, 1962.

©International Monetary Fund. Not for Redistribution 216 SUMMARY PROCEEDINGS, 1962 and recommend the adoption of the draft resolutions2 attached to those reports. The Committees further recommend that the agendas of the Fund, Bank and IDA be amended accordingly.

2. Officers and Procedures Committee The Committees recommend that the Governor for Italy be elected Chairman, and that the Governors for Peru and the Philippines be elected Vice Chairmen, of the Boards of Governors to hold office until the close of the next Annual Meetings. It is further recommended that a Joint Procedures Committee of the Fund, Bank, IFC and IDA be established to be available after the termination of these Meetings, and until the close of the next Annual Meetings, for consultation at the discretion of the Chairman normally by correspondence and, if occasion requires, by convening; and that this Committee shall consist of the Gover- nors for the following members: Ceylon, Colombia, El Salvador, France, Germany, Ghana, Iceland, India, Indonesia, Iran, Italy, New Zealand, Paraguay, Peru, Philippines, Sudan, Syrian Arab Republic, United Kingdom and United States. It is recommended that the Chairman of the Joint Procedures Committee shall be the Governor for Italy, that the Vice Chairmen shall be the Governors for Peru and the Philippines, and that the Governor for Iran shall serve as Reporting Member.

3. Place and Date of the 1963 and 1964 Annual Meetings The Committees recommend that the 1963 Annual Meetings be convened in Washington, D.C., in September 1963. The Committees noted that the Boards of Governors had received invitations from the Governments of Argentina and Morocco to hold their 1964 Annual Meetings in those countries; the Committees recommend that the selection of a site for the 1964 Annual Meet- ings, whether in Argentina, Morocco or elsewhere, be deferred until the 1963 Annual Meetings.

2 For the Fund the Resolution was No. 17-20; see page 258.

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4. Future Annual Meetings The Committees considered the difficulties of accommodating all activities of the Annual Meetings and directed the Secretaries of the Fund and Bank to review various aspects of the Annual Meetings and submit a report before the next Annual Meetings. Approved: /s/ A. Z. SAAD /s/ SERGIO SIGLIENTI (Saudi Arabia) (Italy) Chairman Reporting Member

Annex I to Report IV

September 18, 1962

Dear Mr. Chairman:

I am transmitting herewith on behalf of the Executive Directors a draft resolution,3 which is recommended for adoption by the Board of Governors, on the admission of the Republic of Dahomey to membership in the Fund.

Yours very truly, /s/ PER JACOBSSON Managing Director and Chairman of the Executive Board

Chairman of the Board of Governors 1962 Annual Meeting International Monetary Fund

3 Resolution No. 17-20; see page 258.

©International Monetary Fund. Not for Redistribution RESOLUTIONS

Resolution No. 17-1 Membership for the Republic of Somalia

On July 22, 7967, the Government of the Republic of Somalia applied for membership in the Fund. The Executive Board resolved on February 21, 1962 that action on the application should not be postponed until the next regular meeting of the Board of Governors. In accordance with Section 13 of the By-Laws, the following Resolution was submitted to the Governors on February 26, 1962 for a vote without meeting: WHEREAS, the Government of the Republic of Somalia on July 22, 1961, applied for admission to membership in the Inter- national Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Somalia to membership in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Somalia shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of Somalia shall be US$11.25 million. 218

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3. Subscription: The subscription of Somalia shall be equal to its quota. Somalia shall pay in gold, as a minimum, the lesser of (1) 25 per cent of its quota, or (2) 10 per cent of its net official holdings of gold and convertible currencies as at the date that Somalia makes the representation to the Fund that it has taken all action necessary to adhere to the Articles of Agreement. With the representation provided for in (2) of this paragraph 3, Somalia shall furnish to the Fund the data necessary to determine its net official holdings of gold and convertible currencies. The balance of the sub- scription shall be paid in the currency of Somalia. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Somalia. In case Somalia does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Somalia has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Somalia shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Somalia and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Somalia shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establishment of an initial par value pursuant to this paragraph, Somalia shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: Somalia may not engage in exchange transactions with the Fund (a) before

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the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund Somalia shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contem- plated by paragraph 8(a) and (b) of this Resolution, and Somalia shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Somalia has complied with the conditions set forth in paragraph 7 of this Resolution, Somalia shall become a member of the Fund as of the date when Somalia shall have complied with the following requirements: (a) Somalia shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Somalia shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Somalia may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor- dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine.

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The Board of Governors adopted the foregoing Resolution, effective March 30, 1962. The Articles of Agreement were signed by His Excellency Dr. Omar Mohallim Mohamed, Ambassador of Somalia to the United States, on behalf of the Government of Somalia, on August 31, 1962.

Resolution No. 17-2 Increase in the Quota of the United Arab Republic

On April 23, 1962, the Fund received from the Government of the United Arab Republic a request for an increase in its quota in the Fund from $90 million to $120 million. The Executive Board resolved on May 23, 1962 that action on the request should not be postponed until the next regular meeting of the Board of Governors. In accordance with Section 13 of the By-Laws, the following Resolution was submitted to the Governors on May 24, 1962 for a vote without meeting: RESOLVED: That the quota of the United Arab Republic shall be changed to $120 million, provided that the United Arab Republic consents to the change on or before November 16, 1962, and provided further that, if extraordinary circumstances are deemed by the Executive Directors to warrant an extension of the period in which consent is required pursuant to this Resolution, the Executive Directors may extend such period until such later date or dates as they may determine. Not less than 25 per cent of the increase shall be paid in gold and the balance in the currency of the United Arab Republic. The change shall become effective on the date the Fund receives notice in writing that the United Arab Republic consents to the change but not sooner than the date of this Resolu- tion. Such written consent shall be signed by a competent official whose authority and signature are duly authenticated. The Board of Governors adopted the foregoing Resolution, effective June 22, 1962. On October 10, 1962, the Executive Directors, at the request of the United Arab Republic and in

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accordance with the provisions of the above Resolution, extended the period in which the United Arab Republic might give its consent to this increase in its quota to May 16, 1963.

Resolution No. 17-3 Membership for the State of Kuwait

On January 25, 1962, the Government of the State of Kuwait applied for membership in the Fund. The Executive Board resolved on June 6, 1962 that action on the application should not be postponed until the next regular meeting of the Board of Governors. In accordance with Section 13 of the By-Laws, the following Resolution was submitted to the Governors on June 11, 1962 for a vote without meeting: WHEREAS, the Government of the State of Kuwait on January 25, 1962, applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Kuwait to member- ship in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Kuwait shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944.

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2. Quota: The quota of Kuwait shall be US$50 million. 3. Subscription: The subscription of Kuwait shall be equal to its quota and not less than 25 per cent of the subscription shall be paid in gold and the balance in the currency of Kuwait. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Kuwait. In case Kuwait does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Kuwait has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Kuwait shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Kuwait and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Kuwait shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establishment of an initial par value pursuant to this paragraph, Kuwait shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: Kuwait may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund Kuwait shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contem-

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plated by paragraph 8 (a) and (b) of this Resolution, and Kuwait shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Kuwait has complied with the conditions set forth in paragraph 7 of this Resolution, Kuwait shall become a member of the Fund as of the date when Kuwait shall have complied with the following requirements: (a) Kuwait shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Kuwait shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Kuwait may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor- dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine. The Board of Governors adopted the foregoing Resolution, effective July 9, 1962. The Articles of Agreement were signed by Mr. Talaat Al-Ghoussein, Minister Counselor of the Embassy of Kuwait in the United States, on behalf of the Government of Kuwait, on September 13, 1962.

©International Monetary Fund. Not for Redistribution RESOLUTIONS 225 Resolution No. 17-4 Membership for Tanganyika

On August 16,1961, the Government of Tanganyika applied for membership in the Fund. The Executive Board resolved on July 5, 1962 that action on the application should not be postponed until the next regular meeting of the Board of Governors. In accordance with Section 13 of the By-Laws, the following Resolution was submitted to the Governors on July 6, 1962 for a vote without meeting: WHEREAS, the Government of Tanganyika on August 16, 1961, applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Tanganyika to membership in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Tanganyika shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of Tanganyika shall be US$25 million. 3. Subscription: The subscription of Tanganyika shall be equal to its quota. Tanganyika shall pay in gold, as a minimum,

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the lesser of (1) 25 per cent of its quota, or (2) (a) 10 per cent of its net official holdings of gold and convertible currencies as at the date that Tanganyika makes the repre- sentation to the Fund that it has taken all action necessary to adhere to the Articles of Agreement, if at such date its allocated share of the assets of the East African Currency Board shall have been transferred to Tanganyika, or (b) $2,244,200 if its allocated share of the assets of the East African Currency Board shall not have been transferred to Tanganyika at the aforementioned date. With the representa- tion provided for in (2) (a) above Tanganyika shall furnish to the Fund the data necessary to determine its net official holdings of gold and convertible currencies. The balance of the subscription shall be paid in the currency of Tanganyika. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Tanganyika. In case Tangan- yika does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Tanganyika has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Tanganyika shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Tanganyika and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Tanganyika shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establish- ment of an initial par value pursuant to this paragraph, Tanganyika shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation.

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6. Exchange Transactions with the Fund: Tanganyika may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, Tanganyika shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contem- plated by paragraph 8(a) and (b) of this Resolution, and Tanganyika shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Tanganyika has complied with the conditions set forth in paragraph 7 of this Resolution, Tanganyika shall become a member of the Fund as of the date when Tanganyika shall have complied with the following requirements: (a) Tanganyika shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Tanganyika shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Tangan- yika may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor- dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the

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applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine. The Board of Governors adopted the foregoing Resolution, effective August 6, 1962. The Articles of Agreement -were signed by Mr. C. P. Ngaiza, Counsellor at the Office of the Tanganyika Permanent Representa- tive at the United Nations, on behalf of the Government of Tangan- yika, on September 10, 1962.

Resolution No. 17-51 Election of an Additional Executive Director

RESOLVED: There shall be one additional Executive Director who shall hold office until the 1964 Regular Election of Executive Directors if at any time before September 16, 1963 there shall have been admitted to membership, since the last addition to the total number of Executive Directors, countries having votes totalling at least 8,000. Those countries that became members after the 1958 Regular Election, and whose votes are not included in those entitled to be cast by Executive Directors holding office when ballots are cast for the additional Executive Director, shall be eligible to participate in an interim election which shall be held within 90 days after such minimum of 8,000 additional votes has been reached, pro- vided, however, that at least 3,500 votes are eligible to be cast in such interim election. In exceptional circumstances the Executive Directors may extend this period to 120 days. The Executive Directors shall establish such rules as may be appropriate for the conduct of an interim election.

Adopted by the Board of Governors on September 17, 1962.

©International Monetary Fund. Not for Redistribution RESOLUTIONS 229 Resolution No. 17-61 1962 Regular Election of Executive Directors

RESOLVED: (a) That the proposed Rules for the Conduct of the 1962 Regular Election of Executive Directors are hereby adopted; and (b) That a Regular Election of Executive Directors shall take place at the Annual Meeting of the Board of Governors in 1964.

Resolution No. 17-72 Financial Statements, Report on Audit, and Administrative Budget

RESOLVED: That the Board of Governors of the Fund considers the Report on Audit for the Fiscal Year ended April 30, 1962, the Financial Statements contained therein, and the Administrative Budget for the Fiscal Year ending April 30, 1963, as fulfilling the require- ments of Article XII, Section 7, of the Articles of Agreement and Section 20 of the By-Laws.

Resolution No. 17-8 2 General Reserve

RESOLVED: The Board of Governors approves the allocation to the General Reserve of $24,950,966.38, the net income for the fiscal year ended April 30, 1962.

1 Adopted by the Board of Governors on September 17, 1962. 2 Adopted by the Board of Governors on September 19, 1962.

©International Monetary Fund. Not for Redistribution 230 SUMMARY PROCEEDINGS, 1962 Resolution No. 17-91 Amendments to Rules and Regulations

RESOLVED: That the Board of Governors of the Fund hereby notifies the Executive Directors that it has reviewed the amendments to Rules B-8, 1-2 and 1-4(f) of the Rules and Regulations adopted by the Executive Board since the Sixteenth Annual Meeting and has no changes to suggest.

Resolution No. 17-101 Membership for the Federal Republic of Cameroon

WHEREAS, the Government of the Federal Republic of Cameroon on November 21, 1961 applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Cameroon to membership in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Cameroon shall be admitted to membership in the Fund shall be as follows:

1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund.

1 Adopted by the Board of Governors on September 19, 1962.

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(c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of Cameroon shall be US$15 million. 3. Subscription: The subscription of Cameroon shall be equal to its quota. Cameroon shall pay in gold, as a minimum, the lesser of (i) 25 per cent of its quota, or (ii) an amount equal to 10 per cent of the net gold and convertible currency holdings of Cameroon as of the date that Cameroon makes the representation to the Fund that it has taken all action necessary to adhere to the Articles of Agreement. The balance of the subscription shall be paid in the currency of Cameroon. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Cameroon. In case Cameroon does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Cameroon has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Cameroon shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Cameroon and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Cameroon shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establish- ment of an initial par value pursuant to this paragraph, Cameroon shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: Cameroon may not engage in exchange transactions with the Fund (a) before

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the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, Cameroon shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contem- plated by paragraph 8(a) and (b) of this Resolution, and Cameroon shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Cameroon has complied with the conditions set forth in paragraph 7 of this Resolution, Cameroon shall become a member of the Fund as of the date when Cameroon shall have complied with the following requirements: (a) Cameroon shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Cameroon shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Cameroon may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraordinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolution, the Executive Directors may extend such period until such later date as they may determine.

©International Monetary Fund. Not for Redistribution RESOLUTIONS 233 Resolution No. 17-111 Membership for the Central African Republic

WHEREAS, the Government of the Central African Republic on March 26, 1962 applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting the Central African Republic to membership in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which the Central African Republic shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of the Central African Republic shall be US$7.5 million. 3. Subscription: The subscription of the Central African Republic shall be equal to its quota. The Central African Republic shall pay in gold, as a minimum, the lesser of (i) 25 per cent of its quota; or (ii)(a) an amount equal to 2.5 per cent of the combined net gold and convertible currency holdings of the Central African Republic, Chad,

Adopted by the Board of Governors on September 19, 1962.

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the Congo (Brazzaville), and Gabon as of the date that the Central African Republic makes the representation to the Fund that it has taken all action necessary to adhere to the Articles of Agreement, or (b) if its share of the combined net gold and convertible currency holdings of the Central African Republic, Chad, the Congo (Brazzaville), and Gabon, has been allocated to the Central African Republic prior to the date mentioned in (ii)(a) above, 10 per cent of the Central African Republic's net official holdings of gold and convertible currency on such date. The balance of the subscription shall be paid in the currency of the Central African Republic. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of the Central African Republic. In case the Central African Republic does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of the Central African Republic has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, the Central African Republic shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, the Central African Republic and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that the Central African Republic shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establishment of an initial par value pursuant to this paragraph, the Central African Republic shall not change its exchange rates prevail- ing at the time of accepting membership without agreement with the Fund after prior consultation.

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6. Exchange Transactions with the Fund; The Central African Republic may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, the Central African Republic shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contemplated by paragraph 8(a) and (b) of this Resolu- tion, and the Central African Republic shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that the Central African Republic has complied with the conditions set forth in paragraph 7 of this Resolution, the Central African Republic shall become a member of the Fund as of the date when the Central African Republic shall have complied with the following requirements: (a) The Central African Republic shall deposit with the Government of the United States of America an instru- ment stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) The Central African Republic shall sign the original copy of the Articles held in the Archives of the Govern- ment of the United States of America. 9. Limitation on Period of Acceptance of Membership: The Central African Republic may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraordinary circumstances are deemed

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by the Executive Directors to warrant an extension of the period during which the applicant may accept mem- bership pursuant to this Resolution, the Executive Directors may extend such period until such later date as they may determine.

Resolution No. 17-121 Membership for the Republic of Chad

WHEREAS, the Government of the Republic of Chad on March 30, 1962 applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Chad to member- ship in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Chad shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of Chad shall be US$7.5 million. 3. Subscription: The subscription of Chad shall be equal to its quota. Chad shall pay in gold, as a minimum, the lesser of

1 Adopted by the Board of Governors on September 19, 1962.

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(i) 25 per cent of its quota; or (ii) (a) an amount equal to 2.5 per cent of the combined net gold and convertible currency holdings of the Central African Republic, Chad, the Congo (Brazzaville), and Gabon as of the date that Chad makes the representation to the Fund that it has taken all action necessary to adhere to the Articles of Agreement, or (b) if its share of the combined net gold and convertible currency holdings of the Central African Republic, Chad, the Congo (Brazzaville), and Gabon, has been allocated to Chad prior to the date mentioned in (ii)(a) above, 10 per cent of Chad's net official holdings of gold and convertible currency on such date. The balance of the subscription shall be paid in the currency of Chad.

4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Chad. In case Chad does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Chad has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Chad shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Chad and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Chad shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establishment of an initial par value pursuant to this paragraph, Chad shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation.

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6. Exchange Transactions with the Fund: Chad may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, Chad shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contem- plated by paragraph 8(a) and (b) of this Resolution, and Chad shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Chad has complied with the conditions set forth in paragraph 7 of this Resolution, Chad shall become a member of the Fund as of the date when Chad shall have complied with the following requirements: (a) Chad shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Chad shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Chad may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor- dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the

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applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine.

Resolution No. 17-13l Membership for the Republic of the Congo (Brazzaville)

WHEREAS, the Government of the Republic of the Congo (Brazzaville) on November 2, 1961 applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting the Congo (Brazza- ville) to membership in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which the Congo (Brazzaville) shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of the Congo (Brazzaville) shall be US$7.5 million. 3. Subscription: The subscription of the Congo (Brazzaville) shall be equal to its quota. The Congo (Brazzaville) shall 1 Adopted by the Board of Governors on September 19, 1962.

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pay in gold, as a minimum, the lesser of (i) 25 per cent of its quota; or (ii) (a) an amount equal to 2.5 per cent of the combined net gold and convertible currency holdings of the Central African Republic, Chad, the Congo (Brazzaville), and Gabon as of the date that the Congo (Brazzaville) makes the representation to the Fund that it has taken all action necessary to adhere to the Articles of Agreement, or (b) if its share of the combined net gold and convertible currency holdings of the Central African Republic, Chad, the Congo (Brazzaville), and Gabon, has been allocated to the Congo (Brazzaville) prior to the date mentioned in (ii) (a) above, 10 per cent of the net official holdings of gold and convertible currency of the Congo (Brazzaville) on such date. The balance of the subscription shall be paid in the currency of the Congo (Brazzaville). 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of the Congo (Brazzaville). In case the Congo (Brazzaville) does not acquire member- ship in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of the Congo (Brazzaville) has been agreed in accordance with para- graph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, the Congo (Brazzaville) shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, the Congo (Brazzaville) and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that the Congo (Brazzaville) shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accept- ing membership and the establishment of an initial par value pursuant to this paragraph, the Congo (Brazzaville) shall

©International Monetary Fund. Not for Redistribution RESOLUTIONS 241 not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: The Congo (Brazza- ville) may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, the Congo (Brazzaville) shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contemplated by paragraph 8(a) and (b) of this Resolu- tion, and the Congo (Brazzaville) shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that the Congo (Brazzaville) has complied with the condi- tions set forth in paragraph 7 of this Resolution, the Congo (Brazzaville) shall become a member of the Fund as of the date when the Congo (Brazzaville) shall have complied with the following requirements: (a) The Congo (Brazzaville) shall deposit with the Govern- ment of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) The Congo (Brazzaville) shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: The Congo (Brazzaville) may accept membership in the Fund pursuant to this Resolution within six months of the effective

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date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraordinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolution, the Executive Directors may extend such period until such later date as they may determine.

Resolution No. 17-141 Membership for the Republic of Gabon

WHEREAS, the Government of the Republic of Gabon on December 28, 1961 applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Gabon to member- ship in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Gabon shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944.

1 Adopted by the Board of Governors on September 19, 1962.

©International Monetary Fund. Not for Redistribution RESOLUTIONS 243 2. Quota: The quota of Gabon shall be US$7.5 million. 3. Subscription: The subscription of Gabon shall be equal to its quota. Gabon shall pay in gold, as a minimum, the lesser of (i) 25 per cent of its quota; or (ii) (a) an amount equal to 2.5 per cent of the combined net gold and convertible currency holdings of the Central African Republic, Chad, the Congo (Brazzaville), and Gabon as of the date that Gabon makes the representation to the Fund that it has taken all action necessary to adhere to the Articles of Agreement, or (b) if its share of the combined net gold and convertible currency holdings of the Central African Republic, Chad, the Congo (Brazzaville), and Gabon, has been allocated to Gabon prior to the date mentioned in (ii)(a) above, 10 per cent of Gabon's net official holdings of gold and convertible currency on such date. The balance of the subscription shall be paid in the currency of Gabon. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Gabon. In case Gabon does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Gabon has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Gabon shall communicate to the Fund a pro- posed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Gabon and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Gabon shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establishment of an initial par value pursuant to this paragraph, Gabon shall not

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change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: Gabon may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, Gabon shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contem- plated by paragraph 8(a) and (b) of this Resolution, and Gabon shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Gabon has complied with the conditions set forth in paragraph 7 of this Resolution, Gabon shall become a member of the Fund as of the date when Gabon shall have complied with the following requirements: (a) Gabon shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Gabon shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Gabon may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor-

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dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine.

Resolution No. 17-151 Membership for the Republic of Guinea

WHEREAS, the Government of the Republic of Guinea on March 1, 1962, applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Guinea to member- ship in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Guinea shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of Guinea shall be US$15 million. 3. Subscription: The subscription of Guinea shall be equal to its quota. Guinea shall pay in gold, as a minimum, the smaller

1 Adopted by the Board of Governors on September 19, 1962.

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of (i) 25 per cent of its quota; or (ii) 10 per cent of its net official holdings of gold and convertible currencies as at the date Guinea makes the representation to the Fund that it has taken all action necessary to adhere to the Articles of Agreement. The balance of the subscription shall be paid in the currency of Guinea. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Guinea. In case Guinea does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Guinea has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Guinea shall communicate to the Fund a pro- posed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Guinea and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Guinea shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establishment of an initial par value pursuant to this paragraph, Guinea shall not change its exchange rates prevailing at the time of accepting mem- bership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: Guinea may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, Guinea shall represent to the Fund that it

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has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as con- templated by paragraph 8(a) and (b) of this Resolution, and Guinea shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Guinea has complied with the conditions set forth in paragraph 7 of this Resolution, Guinea shall become a member of the Fund as of the date when Guinea shall have complied with the following requirements: (a) Guinea shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Guinea shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Guinea may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor- dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine.

©International Monetary Fund. Not for Redistribution 248 SUMMARY PROCEEDINGS, 1962 Resolution No. 17-161 Membership for the Republic of the Ivory Coast

WHEREAS, the Government of the Republic of the Ivory Coast on December 27, 1961 applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting the Ivory Coast to membership in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which the Ivory Coast shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of the Ivory Coast shall be US$15 million. 3. Subscription: The subscription of the Ivory Coast shall be equal to its quota and not less than US$1,500,000 of the subscription shall be paid in gold and the balance in the currency of the Ivory Coast. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of the Ivory Coast. In case the Adopted by the Board of Governors on September 19, 1962.

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Ivory Coast does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of the Ivory Coast has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, the Ivory Coast shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, the Ivory Coast and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that the Ivory Coast shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establishment of an initial par value pursuant to this paragraph, the Ivory Coast shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: The Ivory Coast may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, the Ivory Coast shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contemplated by paragraph 8(a) and (b) of this Resolution, and the Ivory Coast shall furnish to the Fund such informa- tion in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that the Ivory Coast has complied with the conditions set forth in paragraph 7 of this Resolution, the Ivory Coast shall

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become a member of the Fund as of the date when the Ivory Coast shall have complied with the following requirements: (a) The Ivory Coast shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) The Ivory Coast shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: The Ivory Coast may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraordinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolution, the Executive Directors may extend such period until such later date as they may determine.

Resolution No. 17-171 Membership for Jamaica

WHEREAS, the Government of Jamaica on June 29, 1962 applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of

1 Adopted by the Board of Governors on September 19, 1962.

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Governors may wish to prescribe for admitting Jamaica to mem- bership in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Jamaica shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of Jamaica shall be US$20 million. 3. Subscription: The subscription of Jamaica shall be equal to its quota. Jamaica shall pay in gold, as a minimum, the smaller of (i) 25 per cent of its quota, or (ii) 10 per cent of its net official holdings of gold and convertible currencies as of June 30, 1962. The balance of the subscription shall be paid in the currency of Jamaica. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Jamaica. In case Jamaica does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Jamaica has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Jamaica shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Jamaica and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period

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of 60 days and that Jamaica shall be deemed to have with- drawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establishment of an initial par value pursuant to this paragraph, Jamaica shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: Jamaica may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, Jamaica shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contem- plated by paragraph 8(a) and (b) of this Resolution, and Jamaica shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Jamaica has complied with the conditions set forth in paragraph 7 of this Resolution, Jamaica shall become a member of the Fund as of the date when Jamaica shall have complied with the following requirements: (a) Jamaica shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Jamaica shall sign the original copy of the Articles held in the Archives of the Government of the United States of America.

©International Monetary Fund. Not for Redistribution RESOLUTIONS 253 9. Limitation on Period of Acceptance of Membership: Jamaica may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor- dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine.

Resolution No. 17-181 Membership for the Republic of Niger

WHEREAS, the Government of the Republic of Niger on February 21, 1962, applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Niger to member- ship in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Niger shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944.

1 Adopted by the Board of Governors on September 19, 1962.

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2. Quota: The quota of Niger shall be US$7.5 million. 3. Subscription: The subscription of Niger shall be equal to its quota and not less than US$750,000 of the subscription shall be paid in gold and the balance in the currency of Niger. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Niger. In case Niger does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Niger has been agreed in accordance with paragraph 5 below . 5. Determination of Par Value: Within 30 days after the Fund so requests, Niger shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Niger and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Niger shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establishment of an initial par value pur- suant to this paragraph, Niger shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: Niger may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, Niger shall represent to the Fund that it has taken all action necessary to sign and deposit the Instru- ment of Acceptance and sign the Articles, as contemplated by paragraph 8(a) and (b) of this Resolution, and Niger

©International Monetary Fund. Not for Redistribution RESOLUTIONS 255 shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Niger has complied with the conditions set forth in paragraph 7 of this Resolution, Niger shall become a member of the Fund as of the date when Niger shall have complied with the following requirements: (a) Niger shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Niger shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Niger may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor- dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine.

Resolution No. 17-191 Membership for Upper Volta

WHEREAS, the Government of Upper Volta on April 9, 1962 applied for admission to membership in the International Monetary 1 Adopted by the Board of Governors on September 19, 1962.

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Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Upper Volta to membership in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Upper Volta shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund. (b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of Upper Volta shall be US$7.5 million. 3. Subscription: The subscription of Upper Volta shall be equal to its quota and not less than US$750,000 of the subscription shall be paid in gold and the balance in the currency of Upper Volta. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Upper Volta. In case Upper Volta does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Upper Volta has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Upper Volta shall communicate to the Fund a proposed par value for its currency, and within 60 days

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following the Fund's receipt of the proposed par value, Upper Volta and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Upper Volta shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the estab- lishment of an initial par value pursuant to this paragraph, Upper Volta shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: Upper Volta may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, Upper Volta shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contem- plated by paragraph 8(a) and (b) of this Resolution, and Upper Volta shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Upper Volta has complied with the conditions set forth in paragraph 7 of this Resolution, Upper Volta shall become a member of the Fund as of the date when Upper Volta shall have complied with the following requirements: (a) Upper Volta shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and

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(b) Upper Volta shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Upper Volta may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor- dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine.

Resolution No. 17-201

Membership for the Republic of Dahomey

WHEREAS, the Government of Dahomey on August 17, 1962 applied for admission to membership in the International Monetary Fund in accordance with Section 2 of Article II of the Articles of Agreement of the Fund; and WHEREAS, pursuant to Section 21 of the By-Laws of the Fund, the Executive Directors have consulted with representatives of that Government and have agreed upon the terms and conditions which, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe for admitting Dahomey to mem- bership in the Fund; Now, THEREFORE, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that the terms and conditions upon which Dahomey shall be admitted to membership in the Fund shall be as follows: 1. Definitions: As used in this Resolution: (a) The term "Fund" means International Monetary Fund.

1 Adopted by the Board of Governors on September 21, 1962.

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(b) The term "Articles" means the Articles of Agreement of the International Monetary Fund. (c) The term "dollars" or "$" means United States dollars of the weight and fineness in effect on July 1, 1944. 2. Quota: The quota of Dahomey shall be US$7.5 million. 3. Subscription: The subscription of Dahomey shall be equal to its quota and not less than US$750,000 of the subscription shall be paid in gold and the balance in the currency of Dahomey. 4. Payment of Subscription: The portion of the subscription to be paid in gold shall be paid not later than the day the Articles are signed on behalf of Dahomey. In case Dahomey does not acquire membership in the Fund the gold so paid shall be returned to it by the Fund. The remaining part of the subscription which has not been paid in gold shall be paid before the thirtieth day after the initial par value of the currency of Dahomey has been agreed in accordance with paragraph 5 below. 5. Determination of Par Value: Within 30 days after the Fund so requests, Dahomey shall communicate to the Fund a proposed par value for its currency, and within 60 days following the Fund's receipt of the proposed par value, Dahomey and the Fund shall agree on an initial par value for the currency; provided that the Fund may extend the period of 60 days and that Dahomey shall be deemed to have withdrawn from the Fund if agreement on a par value has not been reached when the extended period expires. In the period between accepting membership and the establish- ment of an initial par value pursuant to this paragraph, Dahomey shall not change its exchange rates prevailing at the time of accepting membership without agreement with the Fund after prior consultation. 6. Exchange Transactions with the Fund: Dahomey may not engage in exchange transactions with the Fund (a) before the thirtieth day after the par value of its currency has been

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agreed in accordance with paragraph 5 above and (b) before its subscription has been fully paid. 7. Representation and Information: Before accepting member- ship in the Fund, Dahomey shall represent to the Fund that it has taken all action necessary to sign and deposit the Instrument of Acceptance and sign the Articles, as contem- plated by paragraph 8(a) and (b) of this Resolution, and Dahomey shall furnish to the Fund such information in respect of such action as the Fund may request. 8. Acceptance of Membership: After the Fund shall have informed the Government of the United States of America that Dahomey has complied with the conditions set forth in paragraph 7 of this Resolution, Dahomey shall become a member of the Fund as of the date when Dahomey shall have complied with the following requirements: (a) Dahomey shall deposit with the Government of the United States of America an instrument stating that it has accepted in accordance with its law the Articles and all the terms and conditions prescribed in this Resolution, and that it has taken all steps necessary to enable it to carry out all its obligations under the Articles and this Resolution; and (b) Dahomey shall sign the original copy of the Articles held in the Archives of the Government of the United States of America. 9. Limitation on Period of Acceptance of Membership: Dahomey may accept membership in the Fund pursuant to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors; provided, however, that, if extraor- dinary circumstances are deemed by the Executive Directors to warrant an extension of the period during which the applicant may accept membership pursuant to this Resolu- tion, the Executive Directors may extend such period until such later date as they may determine.

©International Monetary Fund. Not for Redistribution ATTENDANCE MEMBERS OF DELEGATIONS

Afghanistan Austria Governor Governor Habibullah Mali Achekzai Reinhard Kamitz Alternate Governor Alternate Governor Abdul Hakim Ranguin Franz Stoeger-Marenpach Adviser Advisers Zia H. Noorzoy Franz Fuchs Rudolf Horak Argentina Edgar Plan Ernst A. Rott Governor Alvaro C. Alsogaray Belgium Alternate Governor Governor Ricardo P. Pasman Hubert Ansiaux Advisers Advisers Alberto Ayerza Jacques de Groote Carlos S. Brignone Cecil de Strycker Antonio M. Di Marco Andre van Campenhout Carlos C. Helbling Maurice Toussaint Guillermo Walter Klein Jose Melero Hector Tassara Bolivia Governor Australia Augusto Cuadros Sanchez Governor Alternate Governor Harold Holt Claudio Calderon Manrique

Alternate Governor Brazil Sir Howard Beale Alternate Governor Advisers Octavio Gouvea de Bulhoes Roy Daniel J. M. Garland Advisers H. G. Heinrich Mauricio Chagas Bicalho F. C. Pryor Gabriel Costa Carvalho R. J. Whitelaw Casimiro Ribeiro 261

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Burma China Governor Governor U Kyaw Nyein Chia-Kan Yen

Canada Alternate Governor Pao-Hsu Ho Governor Donald M. Fleming Advisers R. C. Chen Alternate Governor David T. Chow Louis Rasminsky K. H. King Temporary Alternate Governor K. T. Li A. F. W. Plumptre I. S. Sun Beue Tann Advisers Martin Wong L. Denis Hudon Kuo-Hwa Yu S. J. Handfield-Jones R. W. Lawson Colombia D. C. Taylor J. D. Tigert Governor Donald Wilson Eduardo Arias Robledo Temporary Alternate Governor Ceylon Aurelio Ramos Alternate Governor D. W. Rajapatirana Advisers Jose Camacho Temporary Alternate Governor Jorge Mejia-Palacio W. Tennekoon Advisers Costa Rica C. Gunasingham Governor T. Jayakoddy Alvaro Castro S. C. A. Nanayakkara Temporary Alternate Governor Chile Max Gurdian R. Governor Adviser Walter Muller Gonzalo J. Facio Alternate Governor Alvaro Orrego Barros Cuba Temporary Alternate Governor Not represented Fernando Maira Cyprus Advisers Luis Aguirre Governor Javier Urrutia C. C. Stephani

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Adviser Alternate Governor A. Georghiou Stanislaw Kirkor Adviser Denmark Wolde-Mariam Girma Governor Svend Nielsen Finland Alternate Governor Governor Einar Dige Reino Rossi Advisers Alternate Governor Torben Friis Eero Asp Kurt Hansen Advisers J. B0rglum Jensen Jaakko Lassila Steen M. Secher Richard R. Seppala

Dominican Republic France Governor Governor Ramon Caceres Troncoso Jacques Brunei Alternate Governor Alternate Governor Diogenes Fernandez Andre de Lattre Adviser A dvisers Andres A. Freites Louis Cassagnes Pierre Esteva Ecuador Julien-Pierre Koszul Jean de Largentaye Governor Rene Larre Nicolas Fuentes Avellan Rene Letondot Jean-Maxime Leveque Temporary Alternate Governor Maurice Perouse Gregorio Ormaza E. Claude Pierre-Brossolette Michel Rouge El Salvador Dominique Sauvel Pierre M. Viaud Governor Jacques Wai'tzenegger Francisco Aquino h. Olivier Wormser Alternate Governor Luis Poma Germany, Federal Republic of Governor Ethiopia Karl Blessing Governor Alternate Governor Yawand-Wossen Mangasha Ludger Westrick

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Germany, Guatemala Federal Republic of (continued) Governor Temporary Alternate Governor Arturo Perez Galliano Ernst vom Hofe Alternate Governor Advisers Francisco Fernandez Rivas Guenther Duerre Otto Donner Advisers Otmar Emminger Jorge Gonzalez del Valle Ernst Fessler Antonio Palacios Harry Corn Manuel Rubio-Sanchez Walter Habermeier Wilhelm Hanemann Haiti Karl Hohmann Ernst Jirka Governor Dietrich W. Keller Vilfort Beauvoir Helmut Koinzer Alternate Governor Wolfram Langer Moliere Poliard Fritz Schiettinger Dankmar Seibt G. A. Sonnenhol Honduras Fritz Stedtfeld Governor Jorge Bueso Arias Ghana Alternate Governor Governor Roberto Ramirez F. K. D. Goka Adviser Alternate Governor Felix Lloveras H. C. Kessels Iceland Advisers K. Amoako-Atta Governor J. H. Frimpong-Ansah Gylfi Gislason A. K. Kwateng Alternate Governor J. H. Mensah Vilhjalmur Thor

Greece Adviser Thorhallur Asgeirsson Governor Xenophon Zolotas India Alternate Governor Governor John S. Pesmazoglu Morarji R. Desai Adviser Alternate Governor Costa P. Caranicas P. C. Bhattacharyya

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Advisers Israel J. J. Anjaria A. K. Ghosh Governor C. S. Krishna Moorthi Levi Eshkol I. G. Patel Alternate Governor S. L. N. Simha Col. Josef Milwidsky Miss Padma Sundaram V. Y. Tonpe Advisers Mrs. Fanny Ginor Indonesia Aryeh Manor Adin Talbar Governor Y. J. Taub Soemarno Italy Temporary Alternate Governor Khouw Bian Tie Governor Roberto Tremelloni Iran Alternate Governor Governor Guido Carli Ali Asghar Pourhomayoun Temporary Alternate Governor Temporary Alternate Governor Sergio Siglienti Manuchehr Agah Advisers Advisers Domenico Brancatisano Nasser Ganjei Mario Cardinal! Ali Akbar Khosropur Davide Cittone Enayatollah Neshwad Guido Forte Mehdi Samii Luigi Marini Egidio Ortona Iraq Silvano Palumbo Giorgio Rota Governor Gaetano Stammati Bakir Al-Dujaili Japan Alternate Governor Subhi Frankool Governor Kakuei Tanaka Adviser Nadjat F. Safwat Temporary Alternate Governors Hajime Murakami Ireland Tadashi Sasaki Makoto Watanabe Governor Taketoshi Yamashita Seamas O Riain Advisers Alternate Governor Kanzo Ichiki Maurice Moynihan Shiro Inoue

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Japan (continued) Laos A dvisers (continued) Governor Yusuke Kashiwagi Phouangpheth Phanareth Tadao Kato Akira Kaya Alternate Governor Masayuki Kitoku Oudong Souvannavong Juro Matsumoto Advisers Haruo Mayekawa Tianethone Chantharasy Hiromichi Miyazaki Sitha Sisombat Yoshio Mizoe Takeshi Nakajima Lebanon Nobuyuki Nakashima Gengo Suzuki Governor Gen Takahashi Andre Tueni Toshisada Uchida Alternate Governor Farid Solh Jordan Adviser Governor Edmond Aouad Izzeddin Mufti A Iternate Governor Liberia A. K. Humud Governor Charles Dunbar Sherman Korea A Iternate Governor Governor J. Milton Weeks Se Ryun Kim A dvisers Temporary Alternate Governor George Blowers Jae Sul Lee Thomas Ireland A dvisers Hae Myong Lee Libya Seung Doo Yoon Yie Joon Chang Governor Khalil Bennani Kuwait Alternate Governor Governor Faraj Bugrara Sheikh Jabir Al-Ahmad Al-Jabir Luxembourg Alternate Governor Governor Hamza Abbas Mirza Hussein Pierre Werner Adviser Alternate Governor Fakhri Shehab Pierre Guill

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Malaya Netherlands Governor Governor Tan Slew Sin M. W. Holtrop Alternate Governor Alternate Governor Ismail bin Mohamed Ali E. van Lennep Adviser Advisers Abdul Ghani bin Mohd. Noor J. A. Brandon Miss Gerda A. Koen E. A. Liefrinck Mexico P. Lieftinck J. H. Lubbers Governor C. van der Tak Antonio Ortiz Men a H. M. H. A. van der Valk Alternate Governor A. F. M. van der Ven Rodrigo Gomez New Zealand Advisers Mario Ramon Beteta Governor Ernesto Fernandez Hurtado G. Wilson Antonio Ortiz Mena Salinas Alternate Governor Gustavo Petricioli Iturbide R. W. R. White Praxedes Reina Hermosillo Adviser A. C. Shailes Morocco

Governor Nicaragua M'Hamed Douiri Governor Temporary Alternate Governor Federico E. Lang Mohamed Kasri Alternate Governor Advisers Jose Maria Castillo Francois Bizard Omar S. Elmandjra Nigeria Gilbert Pierre Governor Abderhaman Tazi Chief F. S. Okotie-Eboh Alternate Governor Nepal R. P. Fenton Governor Temporary Alternate Governor Lakshmi Nath Gautam Zanna Bukar Dipcharima Alternate Governor A dvisers Shree Jung Shah A. A. Ayida

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Nigeria (continued) Alternate Governor Advisers (continued) Emilio G. Barreto T. C. M. Eneli Advisers J. M. Garba Alfredo Alvaro Melo Mallam A. Mai-Bornu Arturo Garcia F. M. C. Obi Carlos Gibson German de la Melena Norway Enrique Novak Governor Jorge Polack Erik Brofoss

Alternate Governor Philippines Christian Brinch Governor Advisers Andres V. Castillo Erling B0rresen Hallvard Hillestad Alternate Governor Arne Kapsto Bienvenido Y. Dizon Gabriel Kielland Paul Koht Advisers Abelardo Buenaventura Pakistan Benito Legarda, Jr. Pablo Lorenzo Governor Silvestre M. Punsalan S. A. Hasnie Alternate Governor Mumtaz Mirza Portugal Advisers Governor S. Munir Husain Rafael Duque A. G. N. Kazi Alternate Governor Panama Manuel Jacinto Nunes Alternate Governor Advisers Carlos F. Alfaro Albino Cabral Pessoa Armenio Fonseca Lopes Paraguay Abel P. Repolho Correia Governor Antonio Alves Salgado, Jr. General Cesar Barrientos Alternate Governor Saudi Arabia Edgar F. Taboada Governor Peru Ahmed Zaki Saad Governor Alternate Governor Enrique Bellido Abid M. S. Sheikh

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Senegal Alternate Governor Manuel Varela Governor Andre Peytavin Advisers Alternate Governor Agustin de Alcocer Mamadou Diarra Jose Aragones Agustm Cotorruelo Francisco Gimenez Torres Sierra Leone Jose Ma. Gonzalez Valles Governor Tomas Lamamie de Clairac A. M. Margai Miguel Paredes Luis Saez de Ibarra Alternate Governor Juan Sarda G. E. Hall Huberto Villar Sarraillet Adviser J. M. Sei Sudan Somalia Governor Abdel Magid Ahmed Governor Abdi Aden Mohamed Alternate Governor Alternate Governor Mamoun Beheiry All Said Arrale Adviser Sweden Mohamed Said An Mussa Governor Per Asbrink South Africa Governor Alternate Governor T. E. Donges S. F. Joge Alternate Governor Advisers G. W. G. Browne H. W. A. de Besche Lars Kalderen Advisers Ake Lundgren S. J. P. du Plessis Baron Carl-Henric Nauckhoff Eugene Myburgh H. K. Wickman G. J. J. F. Steyn A. J. J. van Vuuren P. H. J. J. van Vuuren Syrian Arab Republic J. B. deK. Wilmot Governor Spain Husni A. Sawwaf Governor Alternate Governor Alberto Ullastres Yassar Bitar

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Tanganyika Temporary Alternate Governor Munir Mostar Governor Paul Bomani Advisers Sinasi Arik Alternate Governor Kamuran Sekeroglu C. de N. Hill

Thailand United Arab Republic Governor Governor Sunthorn Hongladarom Abdel Hakim El Rifai Alternate Governor Alternate Governor Bisudhi Nimmanahaeminda Hussein Khaliaf Advisers Advisers Kraisri Chatikavanij Hassan El-Abd Nukul Prachuabmoh Adel El-Garhi Pandit Bunyapana M. Abdel Bari Hamza Abdel Rahman Hamoud Surapol Yen-Ura M. R. Tongtao Tongtaem Guerguis Marzouk

United Kingdom Togo Governor Governor Hospice D. Coco Reginald MaudJing Alternate Governor Alternate Governor M. H. Parsons Paulin E. Eklou Temporary Alternate Governors Tunisia E. D. L. du Cann Sir Frank Lee Governor D, B. Pitblado Hedi Nouira Advisers Temporary Alternate Governor D. A. V. Allen Hedi Ennifer W. Armstrong Adviser R. H. Bonham Carter Ismail Khelil A. K. Cairncross D. Day Miss J. M. Forsyth Turkey D. F. Hubback Governor M. C. Kennedy Ekrem Alican J. Y. Malley R. Miles Alternate Governor D. J. Mitchell Ziya MUezzinoglu Capt. T. M. O'Neill

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L. Pliatzky Temporary Alternate Governor F. J. Portsmore Alfredo Platas C. Raphael Adviser N. M. P. Reilly L. P. Thompson-McCausland General Conrado Saez A. G. H. Wright Venezuela United States Governor Governor Alfredo Machado Gomez Douglas Dillon Alternate Governor Alternate Governor Benito Raul Losada George W. Ball Advisers Temporary Alternate Governors Carlos D'Ascoli Henry H. Fowler Gustavo Escobar John M. Leddy Ernesto Peltzer Robert V. Roosa Carlos Perez de la Cova Frank A. Southard, Jr. Aquiles J. Rivas Advisers Erie Cocke, Jr. Viet-Nam Edward Gudeman Fowler Hamilton Governor Alfred Hayes Vu Quoc 1 hue Walter W. Heller A Iternate Governor John S. Hooker Buu Hoan G. Griffith Johnson Tom Killefer Robert H. Knight Yugoslavia Harold F. Linder William McC. Martin, Jr. Governor James A. Reed Nikola Miljanic John Sparkman Alternate Governor Brent Spence Vladimir Ceric William B. Widnall A dvisers Uruguay Slobodan Martinovic Augustin Papic Governor R. Radulovic Romeo Maeso V. Ristic

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OBSERVERS

Burundi Jean Mboudy Raymond Magloire Ferdinand Bitariho Comte Michel d'Ursel Eric Manirakiza Guinea Ousmane Baldet Cameroon Charles Onana-Awana Ivory Coast Francois N'Liba-N'Guimbous Jacques Kuoh Moukouri Raphael Sailer Jerome Mendouga Konan Bedie Norbert R. Beyrard Central African Republic Honore Polneau Jean Batigne Jean Pierre Kombet John C. Elliott Jean-Paul Mokodopo

Chad Jamaica Adam Malick Sow D. B. Sangster Hissene M. Guiagoussou S. W. Payton

Congo (Brazzaville) Malagasy Republic George Martres Louis Rakotomalala Emmanuel Dieudonne Gomah Victor Miadana Raymond Rabenoro Congo (Leopoldville)

Emmanuel Bamba Mali Albert Ndele Felice Frasca Lamine Sow Dominique Kiabilua Eli Lobel

Dahomey Niger B. Borna Ilia Salifou Marcel Tokpanou Innocent P. Dalmeida Rwanda Gabon Gaspard Cyimana Andre Gustave Anguile Comte Michel d'Ursel Jules Mbah Fidele Nkundabagenzi

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Trinidad and Tobago European Monetary Agreement A. N. R. Robinson A. Hay W. G. Demas Food and Agriculture Organiza- Upper Volta tion of the United Nations Moi'se Traore C. W. McLean Pierre C. Damiba Pierre Sanner Jean Caillard Inter-American Development Bank Bank for International Felipe Herrera Settlements T. Graydon Upton Ignacio Copete Guillaume Guindey Alfonso Rochac Milton Gilbert Robert Menapace H. H. Mandel Julio Gonzalez del Solar CONTRACTING PARTIES to the Gen- eral Agreement on Tariffs and International Labor Organization Trade Ralph Wright Eric Wyndham White

Organization for Economic Coop- Development Assistance Com- eration and Development mittee Thorkil Kristensen James W. Riddleberger Jean Cottier Gunter Keiser European Economic Community Luciano Giretti Jack Downie Robert Marjolin Roger Ockrent Franco Bobba Ottino Caracciolo di Forino Heinrich Hendus Robert Triffin Organization of American States European Free Trade Association Jorge Sol Castellanos Frank E. Figgures Walter J. Sedwitz Sigfried Garbuny

European Investment Bank Technical Assistance Board Hans Karl von Mangoldt- Reiboldt David Owen Giandomenico Sertoli Rajendra Coomaraswamy

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United Nations United Nations Educational, Seieii- _, ... , _ tific, and Cultural Organization Philippe de Seynes Raul Prebisch Jose Antonio Mayobre Ah Vnom Martin Hill Henry S. Bloch David Pollock Special Fund Paul G. Hoffman World Health Organization Roberto M. Heurtematte Clinton Rehling Dr. Abraham Horwitz

©International Monetary Fund. Not for Redistribution EXECUTIVE DIRECTORS AND ALTERNATES

Executive Directors Alternate Executive Directors Frank A. Southard, Jr. John S. Hooker D. B. Pitblado Raymond H. Bonham Carter Jean de Largentaye Jacques Wai'tzenegger Wilhelm Hanemann Walter Habermeier J. J. Anjaria S. L. N. Simha Ahmed Zaki Saad Albert Mansour Gengo Suzuki M. Kumashiro Andre van Campenhout Maurice Toussaint Louis Rasminsky L. Denis Hudon Jorge A. Montealegre Lempira E. Bonilla J. M. Garland F. C. Pryor Pieter Lieftinck H. M. H. A. van der Valk Guillermo Walter Klein Javier Urrutia Mauricio C. Bicalho Gabriel Costa Carvalho Beue Tann I-Shuan Sun Thorhallur Asgeirsson Gabriel Kielland Sergio Siglienti Costa P. Caranicas Soetikno Slamet Amon Nikoi

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©International Monetary Fund. Not for Redistribution Reference List of Principal Topics *

Developing countries and primary products Aid and finance from abroad 74, 87, 125, 176, 184, 185 Development and industrialization, problems of. . 14, 96, 120, 136, 145, 153, 163, 170, 176 Export price fluctuations and compensatory financing. . 13, 35, 97, 126, 138, 145, 150, 156, 164, 169 Exports and markets for them, need to expand. . 14, 30, 63, 84, 108, 126, 138, 146, 150, 156, 166, 170, 174, 176, 182,184 Stabilization, problems of 83,123 Terms of trade 74, 79, 126, 144, 153, 168, 172, 174, 176, 183 Fund Activities 7, 16, 62, 95, 144 Annual Report, comments on policies discussed in 56, 83, 132 Borrowing arrangements 5, 19, 44, 56, 64, 72, 86, 111, 128, 144, 151, 164 Changes in functions, proposed and discussed 148, 151,156 Use of Fund's resources and of diverse currencies 18, 21, 83, 86 Gold Exchange system 66, 70, 82, 114 Guarantee of currencies, proposals for 76,112,118 Price of 98, 111, 113 Inflation Remedies for 8, 110 International cooperation Achieved 44, 59, 64, 72, 104, 107, 108, 181 Proposals for greater 67, 87, 107, 111 International liquidity And national responsibilities 71, 109, 117, 157 Increases in, possible need for discussed. .26, 65, 98, 103, 114, 157, 163 Regional blocs and possible discrimination. . .74, 80, 88, 146, 150, 153, 166

1 This list relates only to the Addresses and Statements. It excludes discussions of individual countries by their Governors, and also personal tributes.

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