Abstract

IMF - Annual Meeting 1978 in the Spirit of International Cooperation

This report describes and comments on the most important results of this year’s Annual Meeting of the International Monetary Fund. Since the Interim Committee of the Board of Governors of the IMF has developed into the probably most important decision-making body in the field of monetary policy, without having been legally authorized to do so, since it was set up in autum 1974, this report is mainly based on the results of the negotiations within the Interim Committee. The twenty members of the Committee were unanimous in their assessment of the current situation and outlook for the world economy which they viewed with cautious optimism. As regards the question of resuming allocations of SDRs and the Seventh General Review of Quotas it was agreed to consider both these measures to expand liquidity as a package. The Committee’s recommendation to the Board of Governors to take a final decision and vote before the end of the year on the allocation of 4 billion SDRs in each of the next three years 1979 to 1981 was made without there being a need for new liquidity. However, the allocation of SDRs will contribute towards meeting the long-term global need to complement existing monetary reserves in a desirable manner and promote the objective of making the SDR the principal reserve asset in the international monetary system. The Committee’s other resolutions relating to SDRs and concerning the rate of interest they carry, a substition account, and the maintenance of a minimum average balance (reconstitution) will additionally strengthen the standing of the SDR. As regards the review of quotas the Committee agreed to recommend a general increase in quotas of 50 per cent in order to bring about a better balance between the size of the Fund’s resources and the need of members for balance of payments financing over the medium term. In this context, a part of the newly allocated SDRs are to be used to pay 25% of the increase in the members’ quotas. The Committee’s resolutions regarding liquidity policy will no doubt considerably enhance the ability of the Fund to provide financing for effective transitional measures. The willingness of members to engage in constructive cooperation will also strengthen the IMF’s position in the international monetary system.