requests for stand-by arrangements with 10 member countriesAustralia, Brazil, Chile, Ecuador, Honduras, Iceland, Peru, Turkey, Uruguay, and Yugoslavia-in the amount of $482 million. Among the larger operations, the drawing in the equivalent of $175 million in seven currencies by Australia and the stand-by arrangement for an additional $100 million were approved by the Fund in support of that country's efforts to improve its foreign payments position. In connection with the Fund's $160 million stand-by arrangement with Brazil, that Government in March announced a broad program intended to stimulate economic growth under conditions of financial stability. The Fund, in May, also agreed to reschedule Brazil's existing debt of $140 million to the Fund. This was part of a larger program of financial assistance, including a rescheduling of principal repayments on the existing debt of Brazil to the Export-Import Bank, the extension of new credits totaling $168 million by the Bank, a $70 million Exchange Agreement with the U.S. Treasury 19 and, subject to Congressional action, $100 million from the International Cooperation Administration or its successor agency. Additional credits were also provided by other governments and international financial institutions.

Together with the stand-by arrangement with Chile authorizing drawings up to the equivalent of $75 million to assist the Chilean Government in maintaining its economic stabilization program, the Fund announced an immediate drawing of Argentine pesos amounting to the equivalent of $16 million to be used in partial settlement of a balance which had accumulated in favor of Argentina under a recently terminated bilateral trade and payments agreement. Additional resources, including a $15 million Exchange Agreement with the U.S. Treasury 20 and credits totaling $45 million from the Export-Import Bank and a group of private banks, were also provided.

19

"A subsequent portion of the NAC report (p. 29) contains the following entry:

As part of a general program to assist Brazil in achieving balance-of-payments equilibrium within a framework of a free and simplified exchange system, the [National Advisory] Council in May approved a request of the Brazilian Government for an Exchange Agreement for a period of 2 years in the amount of $70 million. This Agreement supplements arrangements with the International Monetary Fund. It was part of a larger package of assistance which included, in addition to the IMF arrangements, new U.S. Government credits and new credits from other Governments as well as various agreements for the rescheduling of payments due on previous loan obligations. Under the Agreement the U.S. Exchange Stabilization Fund undertakes to purchase Brazilian cruzeiros up to the equivalent of $70 million should the occasion arise. Brazilian currency so acquired by the U.S. Treasury would subsequently be repurchased by Brazil for dollars.

20

A subsequent portion of the NAC report (p. 29) contains the following entry:

In February, the [National Advisory] Council approved a request of the Chilean Government for a 1-year exchange agreement under which the Chilean authorities may request the U.S. Exchange Stabilization Fund to purchase Chilean pesos up to the equivalent of $15 million should the occasion for such purchases arise. The agreement, which was signed on February 10, 1961, is designed to assist Chile in its efforts to consolidate economic stabilization and

Since entering into its first stand-by arrangement in 1952, the Fund had approved about $3 billion in such arrangements with member countries. As of June 30, 1961, 16 of these agreements were in effect, representing an agreed amount of $709 million, of which $552 million, or over three-fourths, was still available. (See table 3.) 21

The U.S. Executive Director of the Fund, or his Alternate, acting on the advice of the Council, supported the decisions taken with respect to the foregoing matters.

71. OPERATIONS OF THE INTERNATIONAL MONETARY FUND DURING THE PERIOD JULY 1-DECEMBER 31, 1961: Report of the National Advisory Council on International Monetary and Financial Problems, Submitted February 8, 1963 (Excerpt) 22

SIXTEENTH ANNUAL MEETING

The Sixteenth Annual Meeting of the Boards of Governors of the International Monetary Fund and the International Bank for Reconstruction and Development, and the Annual Meetings of the Boards of Governors of the International Finance Corporation and the International Development Association, affiliates of the Bank, were held in Vienna, Austria, September 18 through September 21, 1961. The U.S. delegation was headed by the Secretary of the Treasury, Douglas Dillon (U.S. Governor of the four institutions) and Under Secretary of State for Economic Affairs, George W. Ball (U.S. Alternate Governor). Under Secretary of the Treasury for Monetary Affairs, Robert V. Roosa, Assistant Secretary of the Treasury and U.S. Executive Director of the International Bank, John M. Leddy, and Special Assistant to the Secretary of the Treasury and U.S. Executive Director of the Fund, Frank A. Southard, Jr., served as temporary U.S. Alternate Governors. Among others, the delegation also included Representatives Abraham J. Multer and Clarence Kilburn, and members of the National Advisory Council.

In presenting the Annual Report to the Board of Governors, the Managing Director of the Fund, Per Jacobsson, reviewed the activities and policies of the Fund during the previous year and examined important developments in the field of international payments against

freedom in its trade and exchange system, while pursuing a program of reconstruction from the damage of the severe earthquakes of May 1960. Exchange operations by the Chilean authorities will be conducted to minimize exchange fluctuations arising from influences which do not reflect a fundamental market trend but are purely temporary or erratic.

21 Not reprinted here.

22 H. Doc. 69, 88th Cong., Feb. 14, 1963, pp. 2-9. Part II of the NAC report.

the background of conditions in late 1959 and early 1960. The Managing Director stated that, in his judgment, the composition and size of the Fund's resources were not adequate to support a healthy international financial structure without further strengthening and that, in the present circumstances, the need for additional resources could be handled most effectively by firm borrowing arrangements with the main industrial countries under Article VII of the Fund Agreement.

Secretary Dillon, in his discussion of the Annual Report, devoted the major portion of his remarks 23 to (1) an examination of economic and financial developments in the United States, and (2) the proposed arrangements for special standby credits to the Fund by the principal industrial countries, referred to earlier by the Managing Director. With respect to the domestic economy, the Secretary indicated that monetary and fiscal policies in the United States had been directed at limiting the extent of the decline in economic activity and at strengthening the forces of recovery. The Secretary also stated that while he was encouraged with respect to the U.S. balance of payments, which had developed in a much more satisfactory manner than in 1960, the United States would continue to make intensive efforts to expand its exports and to achieve a satisfactory and durable equilibrium in its balance of payments.

Referring to the proposal of the Managing Director for firm commitments by the principal industrial countries to lend their currencies to the Fund, the Secretary strongly agreed "that an arrangement of this sort should be worked out to insure the Fund access to the additional amounts that would be needed should balance-of-payments pressures involving these countries ever impair or threaten to impair the smooth functioning of the world payments system."

As the result of a series of informal exploratory discussions among the Governors, it became evident that there was general agreement that specific proposals should be prepared concerning an acceptable arrangement for providing supplementary resources to the Fund. (See below.)

The Governors formally approved amendments to the Rules and Regulations, reviewed the financial statements and audit report for the fiscal year ended April 30, 1961, accepted the administrative budget for the fiscal year ending April 30, 1962, and approved the allocation of the net income of the Fund ($7.2 million) to the General Reserve. The Board of Governors also approved the applications of Liberia, Senegal, Sierra Leone, and Togo for membership in the Fund, subject to the usual terms and conditions.

At the closing session, the Governor for Saudi Arabia was elected Chairman and the Governor for Chile was elected Vice Chairman for the coming year, and it was agreed to hold the Seventeenth Annual Meeting of the Board of Governors in Washington, D.C., during September 1962, jointly with the Annual Meetings of the International

* Text in the Department of State Bulletin, Oct. 9, 1961, pp. 584–588.

Bank, the International Finance Corporation, and the International Development Association.

FUND BORROWING ARRANGEMENTS

Following the Vienna meeting, the Executive Directors of the Fund and the interested governments consulted on propsals under which supplementary resources could be provided the Fund by means of loans to the Fund pursuant to Article VII of the Fund's Articles of Agreement.24 Final negotiations among 10 of the major industrial countries were conducted in December 1961 at a ministerial meeting in Paris, along with discussions in the Fund Executive Board. On December 15, Secretary of the Treasury Dillon and French Minister of Finance Baumgartner exchanged letters setting forth the detailed understandings among the participating countries on the procedures which they would use in making supplementary resources available to the Fund.25 Similar letters were exchanged between the French Finance Minister and other governments. On January 8, 1962, the Fund Board of Executive Directors adopted a decision setting forth the terms and conditions on which the Fund would borrow supplementary resources and make such resources available to a potential drawer. The National Advisory Council was consulted by the U.S. representatives throughout the negotiations and approved the positions taken at the various stages of the negotiations. The Council submitted a Special Report to the President and to the Congress on Special Borrowing Arrangements of the International Monetary Fund in January 1962. The Report was attached to a letter from the President to the Speaker of the House of Representatives on February 2, 1962, transmitting for the consideration of the Congress legislation which would authorize the United States to participate in the special borrowing arrangements.27

26

MEMBERSHIP, QUOTAS, AND ORGANIZATIONAL CHANGES

In the half-year under review, four countries-Cyprus, Laos, Nepal. and New Zealand-became members of the Fund, with quotas of $11.25 million, $7.5 million, $7.5 million, and $125 million, respectively. In this period also, the Syrian Arab Republic and the United Arab Republic became separate members of the Fund. Additional quota increases totaling $23.85 million became effective in the period for the following countries: Costa Rica, Ethiopia, Jordan, Libya, Luxem bourg, Malaya, Paraguay, Peru, and Viet Nam. On December 31.

Text in A Decade of American Foreign Policy: Basic Documents, 19411949, pp. 273–304.

25 Texts in the NAC's Special Report to the President and to the Congress on Special Borrowing Arrangements of the International Monetary Fund (Committee print. Committee on Banking and Currency, House of Representatives, 87th Cong.), pp. 22-24.

28 Text ibid., pp. 17-22; see also the Department of State Bulletin, Jan. 29, 1962, pp. 187-188.

The authorizing legislation was approved on June 19, 1962 (Public Law 87-490; 76 Stat. 105).

1961, 75 countries were members of the Fund with aggregate quotas of $15,043.4 million. (See appendix table E-1.) 28

In August, the Executive Board of the Fund extended the appointment of Mr. Per Jacobsson as Managing Director of the Fund through February 5, 1964, the maximum period of time permitted under the Bylaws of the Fund governing the age limit for this position.

PAR VALUES

Changes in the par values of the currencies of Ecuador, Iceland, and Costa Rica, and establishment of an initial par value for the New Zealand pound were agreed with the Fund during the period under review.

Ecuador

In July the Fund concurred in a change in the par value of the Ecuadoran sucre from 15 to 18 sucres per U.S. dollar. At the same time, most multiple exchange rate practices previously in effect were discontinued. Under the new system, at least 90 percent of all trade and trade-connected transactions will be conducted within 1 percent of either side of parity. A small free market with a fluctuating rate will continue to operate, chiefly as a means of controlling capital

movements.

Iceland

In August, a new par value for the Icelandic krona of 43 kronur per U.S. dollar was agreed with the Fund, replacing the former par value of 38 kronur per U.S. dollar introduced in February 1960. Costa Rica

In September, the Fund concurred in a change in the par value of the Costa Rican colon from 5.60 to 6.625 colones per U.S. dollar. At the same time the exchange system was simplified. The previous official market rate of 5.60 colones per U.S. dollar, which applied to most exports and 50 percent of all imports, was eliminated and all foreign payments, for imports as well as invisibles and capital, are to be made at 6.65 colones per U.S. dollar. Temporary export taxes are to be levied on the proceeds of coffee, banana, and sugar exports. (In support of its exchange reform measures, Costa Rica drew $7.5 million from the Fund, entered into a $15 million standby arrangement with the Fund, and negotiated a $6 million exchange agreement with the U.S. Treasury.)

New Zealand

By agreement between the Government of New Zealand and the Fund, an initial par value of 0.359596 New Zealand pound per U.S. dollar ($2.78 per New Zealand pound) was established in October. Since August 1948, the New Zealand pound had been maintained att a fixed relationship to the pound sterling.