740.00119 Council/11–2646: Telegram
The Acting Secretary of State to Senator Vandenberg of the United States Delegation to the General Assembly14
Secdel 1194. As you know, International Monetary Fund operates on basis of fixed quotas to each country for the purchase of dollars with their local currency. Under Articles of Agreement, Fund cannot start operating, however, until exchange rates have been fixed for countries having about two-thirds of such quotas. When this has been done, the countries for which exchange rates have been fixed can then purchase dollars up to the limit of their quota paying for same in their local currency. Such purchases are approved only for current transactions which however would include payments of UN assessments.
Since there is now a disparity of from one hundred to eight hundred percent between official and actual market rates of exchange in many countries, particularly in Europe, you will appreciate, I am sure, the great difficulty which the Fund faces in fixing a proper rate. Up to now no rates have been fixed. The Fund expects to begin operations [Page 488] sometime this winter. At such time, the amount of dollar exchange that the members of the Fund exclusive of the United States and the United Kingdom could purchase from the Fund in the first year of operation is over three-quarters of a billion dollars provided the necessary conditions of purchase are met.
If there is any further information desired please let me know.
- Drafted by the Under Secretary of State for Economic Affairs (Clayton).↩