UNITED NAT(ONS

Distr. ECONOMIC GENERAL AND E/2945/Add.l 4 March 1957 SOCIAL COUNCIL \"'IRIGINAL: ENGLISH

Twenty.third session Item 3

REPORT OF THE :lVTERNATIONJi.L MONETAI1Y FUND

I Note by the Secretary-General

The SecretaL-y-General has rece1.ved, for submission to the twenty-third

sess:i.on of the E\.~0n0mic and Social Ccuncil, in addition to the annual report of the International Monetary Fund for the fiscal year ended 30 April 1956, the attached suwmary of Fund activities, from 1 May 1956 through 31 January 1957.!/

!/ In view of the limited number of copies of the summary available, members are requested to bring their copies with them to the meetings.

5.7-07907 Th'TERNATIONAL MONETARY FUIID SU.vJNARY OF ACTIVITIES

May 1, 1956 to January 31, 1957

The follo~-ring statement supplements the Fund r s Annual Report for 1956 and SUlliillarizes its main activities from May 1 1 1956 to Januar3r 31, 1957. Organization and Administration

Argentina became a member of the Fund on Septembe~ 20, 1956, with a quota or $150 million, and Viet-Nam on September 21, 1956, with a quota of $12.5 million. There are now 60 members of the Fund and the aggregate of their quotas is US$8,928.5 million.

On Juue 20, 1956, the Republic of the Sudan applied for membership in the Fund and has "J.Util l,Iarch 311 1957, to acce:pt m<=mb::;,:ship. The Government of the Gold Coast has a:pplied for admission to member­ ship on the attainment by that count:;:-y of constitutional dlndependence, which is expected to take place on March 6, 1957.

The Gover1:.ment of Tunisia applied for membership on November 27, 1956.

Mr. Per Jacobsson, a former member of the manasement of the Bank for International Settlements, assumeQ his duties as Managing Director and Chairman of the R~ecutive Boaru of the Fund on December 3, 1956, succeeding M:r. Ivar Rooth,.

The Board of Governors, UL~der the Chainuanship of Antonio Carrillo Flores, Governor for Mexico, held their Eleventh Annual Heeting in Washington from September 24 through September 28, 1956. The Board heard the Managing Direc­ tor's presentation of the Eleventh Annual Report, discussed the policies and activities of the Fund, acted on recowmendations of Conm1ittees regarding the admission of new oembers and other Fund business and exchanged. view·s on inter­ national developments and prospects. In addition, the Board held the Sixth Regcuar Election of Executive Directors. An informal session was devoted to the presentation by Dr. M. vl. Holtrop, Dr. Paolo Ba~fi and Mr. R. A. Young of papers on Methods of ~~Ionetary Analysis. Meetin3s of the Ftmd 1 s Statistical Correspondents we~e also held to discuss certain problems related to the Ftmd's publications, Internatiov.al Financial Statistics and the Balance of PaJ-wents Yearbook.

The Governor for the Philippines was elected Chai1~an for the ensuing year and the Governors for China·, France, India, the United Kingdom and the United States i-rere elected Vice-Chairmen. The Twelfth Annual Meeting will convene in vJasbington, D.C., on September 23, 1957. - 2 -

Establishment of Par Value

An initial par value for the Argentine peso, at 18.0000 pesos per U.S. dollar 1 -was established on January 9, 1957, by agreement bet·Heen the Fund and the Goverm~ent of Argentina.

Use of tte Fund 1 s Resources and Other Transactions The revised schedule of charges referred to in the Eleventh Annual Report (J.:tge 126), which has been in effect from January 1, 1954, -was extended through Dece~ber 31, 1956, on May 23, 1956, and has since been further extended through December 31, 1957. Transactions from May 1, 1956 through January 31, 1957, were as follows: Repurchases

Bolivia LB$ 4,ooo,ooo.oo. Brazil US$ 27,987,654.91 Cuba 12,500,000.00 Ceylon 1, 98'(' '+ 34.18 Eg~pt (Can$ 14,646,090) 15,oco,ooo.oo Chile 169,608.91 El Salvador 2,500,000.00 Indonesia 27,000,505.93 Indonesia 55,ooo,ooo.oo I :ran 3,210,055.27 !J:.'an l9,7CO,OOO.OO Tu:cl:ey 7,ooo,ooo.oo Ni(!ara'Sua 1,877,648.76 Paraguay 1,5oo,ooo.oo United Kingdom 561,1+70 ,ooo.oo

The stand-by arrangements with Belgium, Peru and Chile continued in effect during the period under revievl. New stand-by arrangements were agreed by the Fund with the six following members:

On November 29, 1956, Bolivia entered into a stand-by agreement "~>Tith the I<'und which permits Bolivia to purchase from the Fund during the following tw·elve months currencies equivalent to $7,500,000. Under this stand-by arrangement a dra1-1int; of $3 million Has made on December 24; 1956, and of $1 million on January 15, 1957, as shovm above. On December 6, 1956, Cuba entered into a stand-by arrangement permitting dra\7ings up to $12.5 millicn.during a period of six months (in addition to the immediate drawing shOim in the above table).

On October 17, 1956, France entered into a stand-by arrangement permitting drawings up to US$262.5 million--dUl~in3 a period of twelve months.

On May 18, 1956, Iran. entered into a stand-by arrangement-permitting draw­ ings up to $17.5 million during a period of six ~onths. Under this arrangement, a first draHing of $12 million ·Has made on July 18 and a second dra>ving of $5.5 million was made on September 26, 1956; subsequent to a repurchase of $3.2 million on November ll~, 1956, a drawing of $2.2 million was made on November 16, 1956. - 3 -

On November 21, 1956, Nicaragua entered into a stand-by arrangement per­ mitting drawings up to $3.75 million during a period of six months. Under this arrangement, a drat·ling of $1,877,648.76 ivas made on December 17, 1956 as shoV."!l in the above table.

Effective December 22, 1956, the United Kingdom (in addition to the immediate drawing shown in the foregoing table) entered into a stand-by arrange­ ment pernitting drawings up to US$738.53 million during a period of twelve months.

Nearly all of these transactions and stand-by arrangements were in amounts exceeding 25 per cent of the members' quotas and, theref'ore, required the use of the vmiver provision under Article V, Section 4 of the Fund Agreement.

To date monetary reserves information as of April 30, 1956 bas been sub­ mitted by fifty members. Nine members have been notified of a repurchase obligation.

Since the Fund started operations on March 1, l947 un~il January 31, 19571 the Fund effected transactions equivalent to US$1,909,996,029.67 on behalf of thirty members.

Repurchases, and other operations having the same effect on members' bal­ ances, have totaled $1,231,356,837.59 in the same period.

During the period June 1952 through January 31, 1957, stand-by credits were arranged with twelve members in amounts totaling $1,267,280,000. This amount has been _reduced durin;:; the period by dra>vings and terminations in amounts totaling $78,377,648.76, leaving outstanding credits still available of $1,188,902,351.24.

On January 31, 1957, the F~1d 1 s holdings of member currencies (including nonnegotiable, noninterest-bearing notes) totaled $G,470,832,810.86, of which $1,4221 757,222.47 was in u.s. dollars. The Fund's total holdings of gold and con­ vertible currencies amounted to US$3,381.0 million, of \-rhich US$1,619,656,259.56 ivere in gold. The largest holding of convertible currencies other than u.s. dol­ lars was in Canadian dollars equivalent to US$210 million. $200 million of the Fund's gold has been invested in short-term u.s. Government securities, as authorized in January 1956.

As of January 28, 1957, the Fund sold part of its own gold for US$300 mil­ lion~ thus replenishing its holdings of US dollars in this amount.

The extension to the International Finance Corporation of the Fund's gold transactions service was authorized on November 21, 1956. Since inception of this service in Februa1~ 1952, transactions equivalent to US$562.3 million have been completed. Increase in Quotas

During the period under review, the quotas of three members were increased. Ecuador's quota was increased frcm US$5 million to US$10 million on August 8, 1956; Nicaragua Is quota from tJS$2 million to us~q. 5 million on October 17' 1956; and the quota of the Dominican Republic frcm US$5 million to US$10 million on September 25, 1956. - 4 -

Consultations in 1955 and 1956 The Seventh Annual Report on Exchange Restrictions, published in July 1956, presented a survey of developments in exchange restrictions throughout the world during the previous twelve months and described the main features of the exchange system of each Fund member and of nine other countries.

The fifth series of consultations with members on the furt~er retention of their restrictive practices began in April 1956. Of the sixty members of ~he Fund, forty-nine have an obligation to consult under Article XIV of the Articles of Agreement of the Fund. The consultations, which have taken place either in the member country or in Washington, have provided opportunities for discussion not o~ly of the economic and financial problems which have given rise to restrictive and discriminatory practices, but also of the possibilities of further relaxation. The Fund is continuing its endeavors to help in the elimination of restrictions and much of its effort has been sp~nt on advice a~d assistance to members tbat are trying to advance to~ard the reer.tablisrunent or a multilateral system of payments.

Changes in Excha.nge S~rstems

The more important cha,nges in members 1 exchange systems include the following:

Bolivia. The Government of Bolivia consulted the Fund ·regarding a comprehensive economic stabilization program which ~ent into effect on December 15, 1956. The program provided for a fundamental'reforro of the exchange system and procedures for exchange stabilization. The new exchange system is based on a unified, fluctuating exchance rate1 replacing the com­ plex multiple rates that previously existed. Trade and exchange restrictions are being removed. The Central Bank of Bolivia intends to pennit the boli­ viano to find an appropriate level in the free market as quickly as possible, with the Bolivian authorities intervening in the market vlhenever necessary to avoid excessive variations arising from temporary factors.

Brazil. The Government of Brazil consulted the Fund in May 1956 regarding changes in its export bonus arrangements involving both commodity classifica­ tions and rates of bonus.

China. On October 24, 1956, the current diplomatic rate of l~$34.00 to the u.s. dollar was applied to rewittances to Taivran by foreigners and over­ seas Chinese for investment purposes.

Colombia. The Government of Colombia consulted the Fund in December 1956 on proposed changes under its restrictive system in the scope of transactions in the free market. These changes made 'outgoing capital paJwents py residents and certain other invisible transactions subject to license.

Iceland. The Government of Iceland cons~lted the Fund in December 1956, regarding the introduction of certain changes in its exchange system. The import certificate system was abolished, a 16 per cent tax on the sale of' foreign exchange for commodities and invisibles (with certain exemptions) was introduced, and the fee payable on licenses for foreign exchange for tourism and business travel was increased. The proceeds of the tax and the fee accrue to an Ex:port l',und from 'Hhich payments are made to producers of export commod­ ities. Indonesia. The Indonesian Government consulted the Fund in August 1956 regarding the~ntroduction or a new system of ~g?ort bonuses to stimulate export trade. The bonuses are paid in the form of necotiable certificates (BPE) for foreign exchange ranging in value 1Tcm 3 per cent to 20 per cent

of the f .. o. b. proceeds or about 30 Ci.ifferent e..xport products 1 including rubber, copra, coffee and tea. The exchange certificates may be used for the importation of certain pl'oducts for vlhich no foreign exchange -v;as pre­ viously made available, for travel abroad and for certain other purposes .. Effective September 3, 1956, Indonesia modified further the system of export inducement certificates and reclassified imports for the purpose of fixing levies (TPI certificates).

I~el. In Decemb~r 1956, the Government of Israel consulted the Fund regarding an alteration in the rate of exchange for books, magazines, and ne"impapers from an effective rate of I£1 to I£1. 4o per US$1.

Turkey. On October 8, 1956, the Turkish authorities revised the de­ blockage exchange system, a multiple currency practice by which transfers of capital assets and earnings accruing from such assets, provided they were not covered by the Law to Encourage Foreign Investr1ents, were subject to a blocking arrangement. Instead of providing that deblockage transactions should be carried out at rates negotiated between banks and exporters, the new system provides for exchange rates fixed by the authorities. The same rates will be applied to other specified transactions for whlch hitherto the official rute had to be used.

Technical Assistance

During the period May 1, 1956 through January 31, 1957, thirty-five member countries have been visited by representatives of the Fund staff for purposes of consultation, teclh~ical assistance or the exchange of views and information.

Training Program

The most recent training progr£un \vas starterl in Se:r;;te:rr.ber 1956, with t11enty trainees from tuenty me:O:ber countries. Information

A brochure, The First Ten Years of the International Monetary Fund, pub­ lished in August 1956, reported on the operations of the Fund and its role in the Qevelopment of international monetary cooperation during the first decade of its activities.