§ Detailed statement of immediate steps to assist the functioning of the international monetary system
§ 1. The Committee recognises that it will be some time before a reformed system can be finally agreed and fully implemented. It therefore proposes that, in the interim period, the Fund and member countries should pursue the general objectives set out in paragraph 1 of the Outline and should observe, so far as they are applicable, the principles contained in Part I of the Outline. It further proposes that a number of steps should be taken immediately to begin an evolutionary process of reform and to help meet the current problems facing both developed and developing countries, and calls upon members to collaborate with the Fund and with each other to give effect to those proposals as set out below.
§ Interim Committee of the Board of Governors on the International Monetary System
§ 2. The Committee recommends the establishment of an Interim Committee of the Board of Governors on the International Monetary System, with an advisory rôle in those areas in which the Council referred to in paragraph 222 31 of the Outline will have decision-making powers, namely, in supervising the management and adaptation of the monetary system, overseeing the continuing operation of the adjustment process, and dealing with sudden disturbances which might threaten the system. It notes that the Executive Directors are accordingly preparing for adoption by the Board of Governors a Resolution to establish the Interim Committee. It is envisaged that the new Committee will hold its first meeting at the time of the Annual Meeting in September.
§ The adjustment process
§ 3. The Committee recognises that in the interim period, with significant changes in prospect for the world balance of payments structure, there is a need for close international consultation and surveillance of the adjustment process. It recommends that countries should be guided in their adjustment action by the general principles set out in paragraph 4 of the Outline. It calls upon members to co-operate with one another and with international institutions, during the current period of exceptional and widespread payments imbalances, to find orderly means to deal with these imbalances without adopting policies that would aggravate the problems of other countries, and to promote equilibrating capital flows: in this connection the Committee has endorsed the immediate establishment of a facility in the Fund to assist members in meeting the initial impact of the increase in oil import costs. The Committee calls upon the Fund to exercise surveillance of the adjustment process through the Council (or, for the time being, the Interim Committee of the Board of Governors) and the Executive Directors, on the lines of the procedures set out in paragraphs 5–10 of the Outline, and subject for the time being to the following provisos, namely that:
- (a) the Fund will seek to gain further experience in the use of objective indicators, including reserve indicators, on an experimental basis, as an aid in assessing the need for adjustment, but will not use such indicators to establish any presumptive or automatic application of pressures;
- (b) determination of what is a disproportionate movement in reserves will be made in the light of the broad objectives of member countries for the development of their reserves over a period ahead, as discussed with the Fund; and
- (c) the pressures which may be applied to countries in large and persistent imbalance will continue to be those at present available to the Fund.
§ Exchange rates
§ 4. The Committee stresses that, during the interim period, exchange rates will continue to be a matter for international concern and consultation and attaches particular importance to the avoidance of competitive depreciation or undervaluation. The Committee notes with satisfaction that in accordance with its recommendation the Executive Directors are adopting a decision on guidelines for the management of floating exchange rates during the present period of widespread floating.223
§ 5. The Committee recommends that, during the interim period, countries should be guided by the principles set out in paragraphs 14–17 of the Outline in relation to controls and to co-operative action to limit disequilibrating capital flows. The Committee attaches particular importance to the avoidance of the escalation of restrictions on trade and payments for balance of payments purposes during the interim period. The Committee invites members to subscribe on a voluntary basis to the Declaration concerning trade and other current account measures for balance of payments purposes attached to this statement. The Committee invites the Executive Directors to establish the necessary procedures in connection with the Declaration, and to make arrangements for continuing close co-ordination with the GATT.
§ Global Liquidity
§ 6.(a) The Committee calls upon members to cooperate with the Fund during the interim period in seeking to promote the principle of better management of global liquidity as set out in paragraph 2(d) of the Outline. It recommends that the Fund should assess global reserves and take decisions on the allocation and cancellation of SDRs in accordance with paragraph 25 of the Outline, and should periodically review the aggregate volume of official currency holdings in accordance with paragraph 19 of the Outline and, if they are judged to show an excessive increase, should consider with the countries concerned what steps might be taken to secure an orderly reduction.
§ (b) The Committee further recommends that the Fund should give consideration to substitution arrangements.
§ (c) Finally, the Committee recommends that there should be further international study in the Fund of arrangements for gold in the light of the agreed objectives of reform.
§ Valuation of the SDR
§ 7. The Committee notes with satisfaction that, following its recommendation concerning the interim valuation and interest rate of the SDR, the Executive Directors are adopting decisions on these questions.
§ The special interests of developing countries
§ 8. The Committee recognizes the serious difficulties that are facing many developing countries, and agrees that their needs for financial resources will be greatly increased. It urges all members with available resources to make every effort to supply these needs on appropriate terms. To this end it calls upon countries with available resources and upon development finance institutions to make arrangements to increase the flow of concessionary funds, and to give consideration to various measures including the redistribution of aid effort in favour of countries in greatest need, interest subsidies, and short-term debt relief on official loans in the special case of countries without access to financial markets. The Committee urges the Executive Board to proceed to an early formulation and adoption of a new facility in 224 the Fund under which developing countries would receive longer-term balance of payments finance. The Committee is not unanimous on the question of establishing a link between development assistance and SDR allocation. The Committee is agreed that the Interim Committee should reconsider, simultaneously with the preparation by the Executive Board of draft amendments of the Articles of Agreement, which it is envisaged would be presented for the approval of the Board of Governors by February 1975, the possibility and modalities of establishing such a link.
§ Ministerial Committee on the transfer of Real Resources
§ 9. The Committee recommends the establishment of a joint ministerial Committee of the Fund and World Bank to carry forward the study of the broad question of the transfer of real resources to developing countries, and to recommend measures to be adopted in order to implement its conclusions. It invites the Managing Director to discuss with the President of the World Bank the preparation of appropriate parallel draft Resolutions on the establishment of such a joint ministerial Committee for adoption by the respective Boards of Governors. It recommends that the joint ministerial Committee should also give urgent attention to the problems of the developing countries most seriously affected by exceptional balance of payments difficulties in the current situation, bearing in mind the need for coordination with other international bodies, and that preparatory work on this aspect should be started immediately in advance of the establishment of the Committee.
§ General review of quotas
§ 10. The Committee notes that work has started on the current general review of Fund quotas and urges the Executive Directors to complete their work as soon as possible, bearing in mind the general purposes of the reform.
§ Amendments of the Articles of Agreement
§ 11. The Committee has asked the Executive Board to prepare draft amendments of the Articles of Agreement, as needed to give effect to Part II of the Outline or as otherwise desired, for further examination by the Interim Committee, and for possible recommendation at an appropriate time to the Board of Governors. In particular draft amendments should be prepared on the following proposals:
- (a) to establish the Council referred to in paragraph 31 of the Outline;
- (b) to enable the Fund to legalise the position of countries with floating rates during the interim period;
- (c) to give permanent force to the voluntary pledge described in paragraph 5 above concerning trade or other current account measures for balance of payments purposes;
- (d) to authorise the Fund to establish, as and when agreed, a Substitution Account;
- (e) to amend the present provisions concerning gold;
- (f) to authorise the Fund to implement a link between development assistance and SDR allocation; and
- (g) to introduce improvements in the General Account and in the characteristics of and rules governing the use of the SDR, as well as any other consequential amendments.