Statement of the Governor of the Bank and Fund for Canada

Walter L. Gordon

At our meetings in Tokyo last year, much of our attention was devoted to the question of international liquidity. The developments of the past 12 months emphasize the importance of making practical progress in dealing with this matter.

Since our last meeting, the two chief reserve currency countries have taken impressive steps to remedy their international deficits. The United States has already achieved a significant reduction in her deficit, and Britain expects to eliminate hers in about 15 months’ time.

As the IMF Annual Report points out, some shrinkage occurred during the first part of this year in the amount of international liquidity outstanding, the first such shrinkage in many years.

Fortunately, Canadian reserves, which are not large in relation to the magnitude of our international transactions, have not fallen. At present we are benefiting directly from a special large sale of wheat to the Soviet Union, one effect of which is to increase the supply of gold on international markets. This welcome accretion to the western world’s monetary gold reserves constitutes a partial offset to the decline in liquidity to which I have referred.

Economic expansion in Canada has been proceeding at a high and satisfactory rate which shows no signs of abating. Canada has always been export oriented. Over 20 per cent of our gross national product stems from our export of goods and services. The extensive exploitation of our natural resources of all kinds has traditionally depended upon foreign demand. Primary products still form a large proportion of our total exports. In addition, as we have become more industrialized, manufactured goods are accounting for a growing proportion of our total exports. We are selling these goods in the highly competitive markets of the United States and Western Europe. I mention these facts about the importance of exports in the Canadian economy in order to emphasize our deep concern that the international monetary system should continue to function well.

I should point out that we in Canada have a balance of payments problem of a special kind. Our current account transactions have for more than a decade resulted in substantial deficits. Deficits in our transactions with the United States have averaged over $1.25 billion annually. We have covered these by the surpluses we enjoy in our transactions with other countries and by inflows of capital which usually have been available to us. But recent experience has shown that it would be unwise for us to count on being able to finance, year in and year out, such large deficits on current account. It is in our interest, therefore, gradually to bring our current account transactions into somewhat better balance—and thus become somewhat less vulnerable to fluctuations in the flows of capital from abroad. The solution to our problem must involve an improvement in our position vis-à-vis the United States. We do not wish to place restrictions upon imports. Therefore, to achieve our objective—an objective which I suggest is in everyone’s best interest—we must increase our exports.

Again let me emphasize that no country has a greater stake than Canada in world conditions as a whole. The maintenance of a high and expanding level of world trade and economic growth is of vital interest to us. There are two factors of great importance in determining these world conditions: the supply of liquidity and the availability of capital for developing countries.

A 25 per cent general increase in the quotas of the Fund, together with special increases for 16 countries, has been negotiated and is in the process of being implemented. As I have said on other occasions, we would have preferred a greater increase, but this step is in the right direction.

Discussions concerning the international monetary system have continued in the Fund, in OECD, and among the Deputies of the Group of Ten. But we have not reached firm conclusions as to what needs to be done to improve the international system, and the time has come to increase the tempo of our work. We cannot wait until the need for action is upon us before reaching agreement upon the most appropriate solution. Many proposals have already been put forward. I do not intend to comment on them individually. We have maintained an open mind about them, realizing full well that any real solution must carry the support of all the major holders of reserves.

However, while I do not wish to discuss details or techniques, there are four main considerations which we believe to be of vital importance in the development of an improved international monetary system.

(1) Gold continues to be regarded all over the world as a unique standard of value and store of liquidity. This being the case, we assume that gold will continue to be the prime international reserve asset. This does not mean that we seek a return to the gold standard, under which the volume of money in a country is linked directly to its gold holdings. To us that would be a retrograde step, completely out of touch with present-day reality.

(2) Any new arrangements must recognize the role to be played by reserve currencies, both in day-to-day international commercial and financial transactions, and, arising out of that role, as components in the reserves of other countries. As a major trading nation, Canada has first-hand experience of the substantial advantages to be gained from the existence of reserve currencies based on sophisticated financial systems which provide opportunities for the profitable investment of funds on a short-term basis.

(3) We share with others the view that the supply of world liquidity should not depend to the extent that it has in the past on the balance of payments position of reserve currency countries. We believe that the working of the international monetary system would be improved if the supply of liquidity grew as a result of deliberate decisions based on the changing conditions and needs of the international trading community. Such management might well be facilitated if a new asset were to be agreed upon. This would be held by central banks and would supplement their holdings of existing assets. Its supply would be varied as conditions changed.

(4) The supply of international liquidity should be managed on an international basis, having regard for the needs of the trading world. We believe that the decision-making process must in some way be associated with the IMF. The Fund has played a central role in international financial affairs for the last 20 years and has accumulated a unique experience. Because of the breadth of its membership and the nature of its work, it is a fruitful source of information concerning the changing problems and requirements of virtually all of the noncommunist world. Already it has highly developed techniques and machinery for reviewing and analyzing the economic and financial situation of its individual members. It would be unwise not to make full use of these facilities.

In very brief form, these are the chief considerations which we believe should be taken into account in any further development of the international monetary mechanism. Discussions so far have not resulted in agreement among the major holders of reserves. And unless agreement is reached by these countries on the basic approach to be followed, we cannot expect to find a workable solution to a problem which is of vital concern to all of us. But unless agreement is reached within a reasonable time, we may find ourselves facing immediate and practical problems for which we are not prepared. I am hopeful, therefore, that agreement will emerge without undue delay if we build on the progress already made in the Group of Ten and in the Fund.

Much valuable technical expertise has been developed in these two bodies. The active participants have learned to work together. Excellent liaison has been established between the Fund and the Group of Ten Deputies. The Deputies will, I am sure, press vigorously ahead with their studies with a view to reaching agreement upon recommendations. These should provide both for an increase in the supply of international liquidity when it is required and for its subsequent control and management. The management and the Executive Board of the Fund will also be continuing their studies of these matters. I agree wholeheartedly with the Managing Director that it would be very useful to seek ways by which the efforts of the Executive Directors and those of the Deputies of the Group of Ten can be directed toward a consensus as to desirable lines of action. By such coordination of efforts we may all be in a better position to take intelligent decisions when the main outlines of a solution begin to emerge.

A few moments ago I mentioned a second important factor affecting the economic prosperity of all of us; namely, the availability of capital for developing countries. This problem is quite different from that of international liquidity and should be recognized as such.

Developing countries need funds mainly to spend, not to put into reserves. This is not to say that developing countries do not need reserves. Quite clearly, as we heard yesterday, fluctuations in their export earnings require them to hold exchange reserves, and more than they have at present. However, funds put into reserves under the present system are held in the form of gold, which earns nothing, or into cash balances or short-term securities which earn relatively little. Developing countries cannot be expected to use in this way more than a minimum amount of the funds they earn or are able to borrow. Access to short-term credit through the Fund or otherwise should help them to economize on reserves in meeting the fluctuations they encounter in their balance of payments. …

Statement by the Governor of the Fund for Cameroon

Victor Kanga

… International monetary cooperation, and any mechanism or reform of such cooperative action, is dependent on economic development and world monetary equilibrium.

It seems to us that the Bank and its affiliates and the International Monetary Fund, by adapting to the facts of the economy of this century, should contribute to the expansion and stabilization of this economy by slowly but surely eliminating the obstacles standing in the way of this new world order, which includes the incorporation of the underdeveloped countries into the international community.

That is why, without wishing to bore you, though we may further emphasize this situation, which is the major concern of all of the developing countries, we nevertheless are aware of the importance of the international financial and monetary problem which our sessions will again this year discuss at length.

Many countries, both at Geneva in the spring of 1964 and at Tokyo last September, have emphasized the insufficiency of international liquidities.

While it is true that this problem is a topical issue, as trade and balance of payments relationships between nations develop in various ways, we believe that it is urgently necessary to make profound changes in the international monetary and financial institutions and, consequently, in the world monetary system, which must be replaced by a rational mechanism truly adapted to the actual facts of the economies of the young underdeveloped States that have newly arrived on the international scene.

It is relevant to recall that, while the powers signing the Articles of Agreement at Bretton Woods defined the basic aims of the Bank and the Fund—for which we are profoundly grateful—in consideration of the interests of the member countries, it would be an exaggeration to say that the peculiar economic situation of many presently developing countries and the very factors of their current evolution were fully anticipated at the time in that Agreement.

The Government of Cameroon will therefore support all efforts tending toward a reform of the international monetary system that would take cognizance of these goals: the continued growth of the underdeveloped countries; and the arrangement of a financial order that, if it did not prevent every catastrophe, would at least considerably diminish the hazards inherent in a drop in the prices of the export products from which our national income is essentially derived.

During our Tokyo meeting, it was decided in principle to increase the IMF quotas, an action which would have to be adopted by vote of the member States. That vote to which the Managing Director of the Fund has referred has just been cast by the member States, and means the placing of fresh resources at the disposal of the Fund.

Now, most of the developing countries derive the greater part of their income from the export of primary products, a subject to which I shall revert.

Since our last meeting, the evolution of the world economy, as many speakers have already said, appears to have been marked by one essential characteristic, the decline in the prices of certain commodities.

Although the 1964 Annual Report of the International Monetary Fund stated that “improvement in export receipts had been fairly general and a number of countries had participated in it” this is certainly no longer the case. In the same Report it was stated that price increases “would make the immediate prospects of the primary products more favorable than they have been for many years.” The facts have proved these forecasts to be incorrect: we have, on the contrary, witnessed a stagnation or even a catastrophic retrogression in the prices of certain products. Without boring you with figures, I shall simply emphasize the oft-cited case of cacao, the recent quotation on which was about 9 cents a pound in New York, which, in Cameroon, corresponds to a price of about CFAF 7. The figure speaks for itself. The development in the price of this product has two aspects. First of all, it was unforeseeable. As the report to which I referred states, the prospects last year were rather favorable and the best experts could believe that, despite the continued increase in production, prices would remain steady. This demonstrates the weakness of economic forecasts, especially where primary products are concerned, for the market for them is not organized and does not appear ready to be organized.

The other aspect is the spectacular decline in the prices of these products. The abrupt drop in cacao, in fact, led to a price level lower by more than two thirds the price of the previous year, i.e., it is out of proportion to the development of the over-all volume of production.

For Cameroon, this situation has resulted in a loss of income of about CFAF 4 billion, or $16 million, which gravely compromises the carrying out of our economic development plan. Let us hope that the Convention on the Settlement of Investment Disputes, which my country would like to sign, will because of the guarantees it contains enable the foreign investors, and even more the Bank, to contribute something to our plan, which has thus been put to a harsh test. We believe that the reforms to be contemplated should enable the Bank and the Fund to apply appropriate measures in such circumstances by means of an institutionalized mechanism. I have laid particular emphasis on cacao because, perhaps, of the impressive nature of the drop in its prices in my country, which enables us to use it as an example in the analysis of fluctuations in the prices of primary products. But it also underlines the fact that these products are the essential resource of the populations of certain developing countries.

This situation is thrown into relief because it occurs, by an irony of fate, in the period following the World Conference on Trade and Development held in Geneva in March-June 1964.

During that meeting, at which eminent specialists from the IBRD and IMF were present, most of the countries recognized the fact that there was need to remedy the fluctuations in the prices of primary products, to avoid not only a decline but even stagnation, which would result in a reaction to the constant increase in the prices of industrial products and certainly a reaction against the ideal of human solidarity.

All of these recommendations were carefully formulated and widely published. But experience has shown that all of this has been completely futile up to now. The gravity of the present situation shows how inadequate are the efforts that the nations have made by themselves so far, through bilateral agreements or through world institutions such as those we represent here.

These considerations induce me not to make a simple speech but to raise a real cry of alarm, in which my thesis might be summarized. In the face of the huge drop in income that many countries have experienced this last year and are unfortunately going to experience again in the coming year, it should be noted that the efforts to be made within the framework of our institutions and the adequate reforms to be realized will be all the more beneficial if the financial and monetary authorities here present deliberately undertake to do their utmost to preserve the developing countries from fluctuations in the prices of their products, rather than endanger in the near future the world monetary equilibrium and consequently the monetary system itself.

This cry of alarm cannot fail once more to impress those who oppose the organization of the primary products market, for it has been demonstrated that only such an organization can protect the developing countries from such disappointments.

This is not the place, we believe, to feel complacent with solutions based on expediency. But we do believe that, in the economic and financial field more than in any other, international cooperation, supporting the efforts and sacrifices—sometimes extreme—of the less prosperous countries, cannot have positive effect unless it is based on an understanding of the needs of the latter and on the solidarity of the others.

I therefore make this earnest appeal to this meeting: that the highly industrialized nations represented here become aware of the exceptionally grave nature of the present situation of our countries in regard to the decline in our receipts as a result of the lack of organization in the markets for primary products, and quickly set up the means within the power of our institutions to provide a remedy. We are, in fact, faced with a situation where traditional procedures have proved inadequate and where it is necessary to innovate, lest our organizations find themselves condemned to being ineffectual in the long run.

But the possibility of carrying out the recommendations of the World Conference on Trade and Development, with which we collaborated and with which we should collaborate closely, depends on the extent to which each member of this meeting is fully aware of the effort to be made. I hope, therefore, that in our work we shall consider this problem and that this eminent contribution will result in effective solutions to the real difficulties with which our young States are faced. My country will unreservedly support any positive reform directed to that end.

We wish to conclude these brief remarks on an optimistic note, for it is true that in the world today the will of the people and of the government tends, despite vicissitudes, to distribute the benefits of international cooperation, to which my country is deeply attached.

Statement by the Governor of the Bank for Iran

Jamshid Amuzegar

More than a year has passed since the last Joint Meeting in Tokyo. Yet the focal problems which occupied that memorable occasion continue to be the central issues of this gathering, with but a sharper focus. The need for longer-run, easier-term credit to the developing countries, despite the efforts of the World Bank, is far from being met, although it now seems more widely recognized and more sharply felt. And the search for new approaches to, and agreements on, increasing international liquidity, despite the efforts on the part of the Fund, is far from being ended, although it appears to be more boldly pursued and more cooperatively embarked upon.

Neither of these problems is close to a generally acceptable or practically effective solution. While the number of aid-seekers (and their need for outside help) is undiminished, the number of aid-givers (and their easy term credits) is not keeping pace with the world capital requirements. Nor is international liquidity being greatly affected by the increasing improvements in the U.S. balance of payments.

Most of the developing countries, after a short-lived improvement in their terms of trade, are again facing serious strains in their external balances. Continued weaknesses in their export incomes, coupled with increasing burdens of their debt servicing, present alarming threats to their development aspirations. The annual balance of payments deficits of these countries have increased from $5 billion in 1956 to something close to $9 billion this year. These countries’ external debts have increased from $9 billion in 1956 to more than $30 billion now, with their annual debt repayments rising from $800 million to more than $3,000 million in the same period. Nor is this all. While the $800 million debt repayments in 1956 constituted only 44 per cent of the loans received from abroad, the $2,900 million repayments of the year 1963 were equal to 53 per cent of external borrowing. And while the total debt burden of the year 1963 was no more than 11 per cent of the borrowers’ national income, the dire prediction is that in 10 short years it will reach 25 per cent of that income.

An IBRD loan, which in many cases is the most favorably termed credit available for developing countries, at 5½ per cent interest with a grace period of 3 to 7 years and repayments spread over 20 years, carries an interest charge of more than 80 per cent of the value of the original loan. Thus, a million dollars borrowed each year for 12 consecutive years will accumulate a repayment installment of more than a million dollars a year within a short span of 12 years. Thereafter, the entire annual borrowing of one million dollars will have to be devoted to debt servicing, with the prospect of debt liquidation becoming bleaker as the years go by. This is an abnormally heavy cost for most of the developing countries, a cost which few can afford to pay. Many developing countries have reached a stage where the inflow of new long-term capital equals repayments of principal and interest on previous loans whether contracted through international institutions or by means of bilateral credit arrangements. This fact, combined with such factors as the adverse terms of trade as well as inability to export manufactured goods in the face of barriers in the developed countries, has created a serious situation which continues to plague economic development in emerging countries. …

Finally, as a gesture to ease the burden of debt servicing borne by developing countries, I believe it would be highly desirable if the International Monetary Fund were to adopt a procedure similar to the Bank’s by applying a two-tier system of charges on the use of the Fund’s resources by developing countries and industrialized nations. That is, in calculating charges pertaining to the repurchase obligations, the “Last In First Out” system, where the Fund treats repurchases as canceling the portions of the Fund’s holding of the member’s currency most recently received, should apply only to the industrialized countries, and a “First In First Out” system, instead, should be applied to the developing countries. Furthermore, we believe that the Fund should revise its system of charges with a view to giving further relief to the debt servicing of the developing countries by not paying undue consideration to rates prevalent in money markets. These changes, if carried out, would spell dynamism and progress; if not, stagnation and regression.

In the light of what appeared in the morning papers, I am not so sure if it would be appropriate to proceed with the remaining part of my statement. It has been reported that the ten big financial powers settled their differences over the path to take toward world monetary reform in a private 45-minute meeting yesterday. If reported correctly, this would be intuitive evidence of the esteem the big Ten hold for the opinions of the smaller nations, as well as their genuine belief in the operation of the Fund as an international agency responsible for regulating the system of world payments and international liquidity. Nevertheless, as our conviction in this respect is profound and our belief sincere, I would take up a few more minutes to expand on our view.

International liquidity, long considered a rich nation’s problem, is now becoming increasingly tied up with the problems of the poor. The rich man’s sneeze often gives the poor man a bad cold. It is obvious that if the United States’ contribution to the creation of international liquidity should be withdrawn without adequate substitutes, the growth of world trade is bound to be badly hampered. And in this predicament the poor and the rich will both suffer.

Of the many proposals put forward for the improvement of the present system of world payments, my Government would be in favor of one closely tied with, and perhaps operated by, the International Monetary Fund. It is in this forum that some attention will likely be paid to the needs of developing countries whose destinies we also share. My Government will support any measure that would strengthen the International Monetary Fund along the lines already proposed by the Fund’s Managing Director in his address to this gathering. This would entail the extension of easily accessible drawing facilities beyond the present gold tranche, open-market operations by the Fund through purchase of members’ national securities, and the creation of international assets which would be gold guaranteed and interest bearing and would also count as members’ reserves.

My Government also supports the proposal for a world monetary conference to be held subsequent to this meeting. I believe such a meeting, organized on the basis of equality through international cooperation, will have a much better chance of finding wider acceptance of a solution to impending problems than, in the ringing words of Mr. Schweitzer, any exclusive conclave of richer countries “clubbing together to solve that problem as if it were for themselves alone.” The task of providing world monetary liquidity should be in the hands of an international body interested in the welfare of all and responsive to the wishes of the many, so that world reserves may be distributed among nations that need them most in a disciplined manner. It is for this reason that I believe a rise in the price of gold is a cure worse than the disease as far as developing countries are concerned. With more than 85 per cent of world gold reserves in the hands of a few rich countries of the West and only 8 per cent belonging to the majority of the world community in Asia, Africa, and Latin America, any possible benefit from higher gold prices will, to say the least, be unjustly accrued and appropriated.

The procedure for the organization of a world monetary conference and the ranking of the various proposals for consideration are not of particular importance. If the preliminary steps can be more easily and effectively taken by a few countries, well and good. But the final review and ratification of whatever solution is found to improve world liquidity should encompass world-wide participation. It is only through such cooperation that the present shortage of long-term easy credit, and short-term, well-managed liquidity can be mitigated if not more permanently solved. In conclusion, it is our considered opinion that in order to alleviate the pain and agony of emerging nations and to raise the intolerably low living standards of the people of the developing world, we must be constantly alert to the factors of growth, the impact of technology, the widening gap between developed and developing countries, and thus be ready for possible transformation of the established order within our institutions. As for the member States, we believe a more realistic cooperation based on understanding is required, and understanding begins with a recognition of differences and not a will to uniformity. To achieve unity we must have affection for diversity. It is our hope that by working together on the grounds of mutual interest, we can demonstrate that international cooperation within the Bank and the Fund is a hardy plant, from which a fruitful and profitable harvest may be accrued to all.

Statement by the Governor of the Bank and Fund for Viet-Nam

Truong Thai Ton

It is for me a great pleasure to join with my colleagues in expressing thanks, on behalf of the Delegation of Viet-Nam, to the Government of the United States and the inhabitants of this large city for having offered us their kind and generous hospitality. Since, by a happy coincidence, the problem of liquidity and the international monetary system heads the list of important discussions at this meeting, one can only be pleased that this year’s meeting of the Bank and Fund is being held in this country, which has always, and on various accounts, been regarded as the nerve center of international finance.

Once more, I believe that we have many reasons to thank the officers of the Fund and Bank for their activities during the past year. We note with satisfaction that the Fund’s financial and technical assistance to member countries has been expanded considerably and that the last fiscal year was also one of the Bank’s most active fiscal periods.

The Annual Report of the Fund this year emphasizes, in the first part, immediately after the crucial question of international liquidity, one of the major difficulties faced by the developing countries: the inadequacy of their fiscal systems in the light of their needs for resources for financing increasing budget deficits. Viet-Nam, now waging a war against communist subversion that takes 50 per cent of its budget expenditures each year, knows all too well the serious and implacable nature of this difficulty, especially since taxable income arising from productive activities is diminishing because of the destruction caused by the war. Moreover, the damage to crops resulting from the large floods at the end of the third quarter of last year and the cost of resettling some 400,000 war refugees and victims of communism have created exceedingly heavy additional charges for our budget.

It should also be emphasized that, parallel to the war effort, Viet-Nam has to carry out a vast program of reconstruction and economic development. True, to carry on this work of national recovery, we have been able to count on substantial aid from countries of the free world, in particular the United States. However, we had to seek first to mobilize all the available resources of our country. This led to a certain inflation which has been superimposed on the budget inflation caused by the exceptional circumstances of war.

Under these conditions, it is clear that one of the major concerns of our Government must be to fight inflation. For the first time in our monetary history, Treasury bills have been issued, and total subscriptions have reached more than one billion piastres in the space of only a few months. Through an increase in interest rates, time deposits and savings accounts have increased more than 50 per cent compared with 1963. But so long as the war continues, demanding constantly increasing effort to ensure victory on both the military and psychological fronts, strict financial discipline is an absolute requirement. Therefore, our Government has now undertaken to reform the existing fiscal system, with the aims in particular of improving tax yields, mobilizing resources for increasing production, and overcoming inflation.

Nevertheless, the efforts that all developing countries are compelled to make at the national level to overcome the difficulties peculiar to their undeveloped condition could not suffice if they continued, on the one hand, to feel both the backlash of an increasingly compartmentalized organization of world trade and the deterioration of their terms of trade, and, on the other hand, to suffer from the lack of short- and long-term capital.

In particular, the nonliberal trade policy adopted by developed countries has obstructed the entry into these countries of primary manufactured products from the underdeveloped countries. To be sure, the action of the Bank and Fund in the form of compensatory financing granted to countries exporting primary products or in the form of assistance for the development and expansion of trade has been highly effective. However, the action necessary for the removal of discriminatory trade practices or other obstacles to the development of international trade should be hastened. This action should be supplemented by a complete revision of the present system of international payments. We also have high hopes that with the general increase in Fund quotas, the Fund will be able not only to grant compensatory financing facilities on a broader basis, for example, by increasing the percentage of this financing, but also to consider ways to aid countries which have experienced a temporary export shortfall as a result of crop losses caused by war, floods, or other natural calamities. …

Statement by the Governor of the Bank and Fund for Ghana

K. Amoako-Atta

Permit me once again to congratulate the Bank and its affiliated institutions and the Fund on another year of successful operations. The progress achieved by the Bank and the Fund in recent years has been the result of a rare combination of solid realism on one part and determination to explore new avenues and to seek new solutions to the world’s economic and financial problems on the other. Once again, the addresses of both Mr. Woods and Mr. Schweitzer have shown a deep appreciation of these problems, and their determination, not only to use all the resources at their disposal to solve them, but also to keep an ever-open mind to suggestions for new solutions.

The problem of closing the gap between the developed and the developing countries looms as large as ever. And, in a fast-shrinking world, the concern of developing countries must be the concern of the developed countries as well. It is with great satisfaction, therefore, that we note the persistent efforts of the Bank and its affiliated institutions as well as of the Fund to explore new avenues in the fields of international monetary cooperation. We believe that the way to the solution of the problems of our age is not and should not be the exclusive preserve of a group of countries. The developing countries as well as the developed countries, the creditor countries as well as the debtor countries, have contributions to make toward the solution of these problems.

In this regard, we are particularly happy to welcome two sister African States, Malawi and Zambia, into our midst. We are also happy to note the presence of the Minister of Finance of Singapore as an observer. It is our sincere hope that their association with the Bank and the Fund will grow to the mutual benefit of us all.

The urge of the developing countries to raise the standards of living of their people within a short time has led to new problems on which we have to focus our attention and for which new solutions must be found. It is a source of hope and encouragement to us that both the President of the Bank and the Managing Director of the Fund have again lived up to expectations by showing appreciation and concern over these problems.

It is essential, therefore, that we give full support to the Bank and the Fund in their attempts to solve these problems. It is also of vital importance that any attempts to solve any of the major problems should be within the framework of the Bank or the Fund. I am referring in particular to the problem of international liquidity and the proposals for conferences to seek a solution to this problem. Quite apart from whether there is a problem of international liquidity or not, some of us in the developing countries feel that it should not be an exclusive privilege or preserve of the developed countries alone to determine the nature of the problem and the solutions thereto. The tendency of the Group of Ten to deal with this problem to the exclusion of others, and the likely danger of by-passing the Fund in their discussions and decisions, should be a matter of immediate concern to us all. Questions of international liquidity are matters which are entirely within the competence of the Fund. They should, therefore, be discussed within the framework of the Fund, and solutions to the problems, if any, should be worked out within this framework.

Having expressed our view on this problem on which we feel very strongly, I will now move on to matters raised by Mr. Woods in his address to us yesterday.

The urgent need of the developing countries to lay firm bases for the rapid growth of their economies has led to problems which we must now face as a matter of fact and as a matter of common concern. The commitment to development plans—which were drawn up at a time when world commodity prices were comparatively buoyant—and the sharp deterioration in the terms of trade of many developing countries have been major handicaps to development in recent years. In the case of my country in particular, the price of our main export crop, cocoa, fell, in recent months, to the lowest level in 28 years. At the same time, long-term capital inflow from the developed countries tended to slow down somewhat owing to the temporary difficulties being experienced by major donor countries and the need for them to correct their own imbalance. Consequently, the gap has had to be filled by short-or medium-term suppliers’ credits. If the downward trend in the price of our major foreign exchange earner had been short-lived or if it had not been so steep, our problems would have been less accentuated. Indeed, the acceptance of some of these suppliers’ credits has been largely motivated by our optimism about future prices of our exports. Between the crop years 1963-64 and 1964-65 alone, Ghana lost US$100 million, as a result of the fall in the average price from $504 per ton, c.i.f., to $392 per ton, c.i.f., and an increase in the crop from 450,000 to over 600,000 tons. Thus, our attempts to increase the production of our main foreign exchange earner have resulted in a very sharp fall in the prices. At the same time, our attempts to diversify our economy by expanding our economic base and diversifying our agriculture have led to an accumulation of debt which is a serious burden on our external payments position.

I believe Ghana is not alone in this. But last year when I raised the question of the possibility of a renegotiation or rescheduling of suppliers’ credit debt servicing at our Annual Meeting in Tokyo, mine was a lone voice. Today, it has become a matter of general interest and concern for the Bank and the Fund, and I note with satisfaction their anxiety to seek a speedy solution to the problem. …

Allied to the problem of debt service, as I mentioned earlier, is the problem of falling commodity prices. To the extent that the developing countries must depend to a large extent on their own resources for development, it is equally essential that they are assured of a reasonable price for their exports. This is not only a trade question. It is a serious development problem. For, quite apart from the fact that unexpected shortfalls in export earnings create problems of development finance, it must be remembered also that fluctuating export prices are not a good basis for development planning, which we all agree is very essential in the developing countries. We are, therefore, interested in the outcome of the exercise now being carried out jointly by the Bank and the FAO with a view to stabilizing the price of coffee. …

Statement by the Governor of the Fund for the Central African Republic

Albert Payao

… Turning now to world monetary problems, I wish to point out first of all that the careful studies made by both the International Monetary Fund and the Group of Ten reached the conclusion that the level of international liquidity was adequate, but that it was nevertheless appropriate, in order to take care of any contingency, to proceed to a general increase of 25 per cent in the International Monetary Fund quotas.

Without opposing this increase, we wish to emphasize that it represents a new sacrifice for our States, the effects of which could be attenuated if it could be accompanied by a concrete quid pro quo.

Aside from this problem of quotas, the problem of reforming the monetary system has now become the central concern of the Fund, as the statements of the Governors who have preceded me have shown.

We believe for our part that the study of this problem should leave the field of discussion of doctrinal theory to take its place in a context where concern for world trade equilibrium should predominate. As has already been said, the study of such a reform should take into account the opinions of all members of the Fund and should not be only the privilege of a limited group.

Thus, we shall give all our support to a project for monetary reform which can help to improve the terms of trade between rich and poor countries, by giving the Third World its proper share of international liquidity.