Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

39. Memorandum From the U.S. Member of the Board of Executive Directors of the International Monetary Fund (Southard) to the National Advisory Council on International Monetary and Financial Problems ⁰

NAC Document 2440

November 25, 1958.

SUBJECT

• Quota Increases in the IMF

The Executive Board of the Fund has made substantial progress in considering the question of an increase in quotas. The principal problems on which agreement has not yet been reached are summarized below.

1. Gold payment. It has been agreed that all countries will pay 25 per cent of the quota increase. What is in dispute is how to assist countries which want some form of easement of this burden. Two methods are being considered:

(a) Quota increases by installment. All agree this arrangement should be permitted. It will also be agreed that only those countries should be included in the 75 per cent participation calculation which pay 20 per cent of the total gold at once and agree to pay the remainder in, say, four annual installments. The undecided question is whether to allow countries broader latitude (e.g., no down payment and no fixed schedule) provided they are not included in the 75 per cent. I advise against this at this stage.

(b) Drawing on the Fund. All agree the Fund should be prepared to consider drawings by “needy” countries to offset the gold payment. The undecided question is what sort of repurchase schedule should be required. Specifically, should any such drawing be limited to 80 per cent of the gold payment; and how promptly should the drawing be repurchased? The Indian Director is strongly objecting to the 80 per cent limit, and is insisting on repurchase in the third, fourth and fifth years after drawing. I have argued for repurchase in three years, and would be willing to give up the 80 per cent limit in return.

2. Special quota increases

(a) A majority of the Board favors a separate resolution on this subject.

(b) Countries with quotas of $15 million and less will be allowed to have special increases, in accordance with an agreed formula, provided they have not already availed themselves of that facility. The 50 per cent increase would then be applied.

(c) The following countries with larger quotas have expressed an interest in a special increase: Germany, Japan, Italy, Mexico, Norway, Cuba, Turkey, and Malaya. Whether the Board will agree on recommendations on this list (which may grow) is not yet clear. Much will depend on the U.S. attitude. I have given general support, and will continue to do so for the time being. It would be helpful to have the advice of the NAC as to how strongly I should press this issue, especially in the case of Germany. I [am] inclined to advise against a recommendation confined to Germany.¹

3. Drawings in inconvertible currencies. There is considerable opposition to an amendment to the Articles of Agreement and it is clear that the whole exercise on quota increases would be much delayed if agreement had to be reached on an amendment. For this reason I recommend against pressing for an amendment. However, the Fund Board is considering other ways of facilitating non-dollar drawings and I believe there will be some useful results.

Frank A. Southard, Jr. ²

0. Source: National Archives and Records Administration, RG 56, Records of the Department of the Treasury, NAC Documents. Official Use Only; For NAC Use Only. The memorandum does not indicate any addressee, but a covering memorandum to the Council from its Secretary states that it was submitted to the Council for consideration at its November 25 meeting.
1. The minutes of the NAC meeting of November 25 record that Southard asked the Council’s guidance on the repurchase schedule for special drawings and as to the importance it attached to a quota increase beyond 50 percent for Germany and possibly other countries. On the first point, the Council favored “endeavoring to hold the repayment period to three years, with a possible compromise, if necessary, of a maximum of two one-year extensions.” On the second point, the “consensus was that it was important to have a large increase in the German quota, but that it should be linked to reasonable increases in the quotas of a few other countries having special situations.” (Ibid., NAC Minutes) Further documentation on this subject is ibid., Records of the Office of the Secretary of the Treasury, Robert B. Anderson, Subject Files, International Monetary Fund.
2. Printed from a copy that bears this typed signature.