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INTERNATIONAL MONETARY FUND CAUTION: ADTiJICS RELEASE CONFIDENTIAL PRESS RELEASE NO. 35 Not for Publication before 3:00 P.M. 2ST. Sunday January 25, 1948 STATEMENT CONCERNING EXCHANGE ACTIONS TAKEN BY FRANCE • ' ' • • • • . . Camille Gutt, Chairman of the Executive Board of the International Monetary Fund, today made the following statement: "The French Government has engaged in full and frank consultations with the International Monetary Fund regarding a plan for exchange adjustment, which would require the approval of the Fund. The essential features of the plan were the following! "The par value of the French franc would be reduced by 44.444 percent, which would result in a change in the rate from approximately 119 francs per U.S. dollar to approximately 214, fl At the same time, a discriminatory multiple introduced whereby U.S. dollars and certain other readily sold for dollars v/ould be bought and sold fluctuating rates which v/ould differ considerably currency practice would be currencies which can be in a market inside France at from the new par value, "French exporters would be permitted to sell in this market one-half of their export proceeds in the designated currencies, the other half being sold to the French monetary authorities at the official par value. French importers would be permitted to buy in this market the designated currencies needed to pay for non-basic commodities. In addition various "invisible" transactions would be authorized to take place in this market, including exchange transactions of tourists, capital transfers and other non-commercial remittances. "The Fond agreed v/ith the French Government that a change in the par value of the franc was necessary, and indicated that it was prepared to concur in a devaluation of the franc to a realistic rate which would be applicable to transactions in the currencies of all members of the Fund. In this connection, the Fund has noted with satisfaction the budgetary and fiscal measures directed at internal monetary stabilization which France has taken in recent months, "The Fund gave careful consideration to the proposal to establish a market in convertible currencies along the lines indicated above. The Fund had no desire to be rigid or doctrinaire in its approach to this matter, particularly in view of the abnormalities of the present situation. Despite serious reservations regarding a sj^stem involving fluctuating rates, the Fund explored various alternatives designed to meet in so far as possible the — 2 — PRESS RELEASE NO. 35 objectives of the French authorities. The Fund was not, however, ablo to agroo to the inclusion in n narkot with fluctu ting rates of any part of the proceeds of exports, "s in its judgnont this entailed the risk of serious ndverse effects on other nenbers of the Fund, without bcinp; necessary to achieve the trr.de objectives sought by the French authorities. "The Fund felt that there would be sco^e for conpctitlvo doprccirtion in the application by one country'- of a fluctuating rate on exports to one rron while other rates ronain stable rnd other countries maintain the parities rgreed with the Fund, f'uch a syston, operating in an inportnnt trading country, would encourage trade distortions and night c^st unwarranted doubt on the real strength of riany currencies through the nppnrorvt discount appliod t>> thor.i in the French systcn, "The Fund ferred that the widespread adoption of such a syston would result in oxchango uncertainty and instability c:v\ produce r disorderly exchange situation fron wh:lch all nonbers of the Fund would suffer. I'hilo recognizing the difficulties of the French position, the Fund felt that the solution oust be found through cooperative efforts to place currencies on a sound rnd stable basis. "The French Govcrnnont found that it could not accept the ••.lodification of its proposal suggostod by the Fund end has :^ow infomed the Fund. that it has decided to go forward with its proposal notwithstanding the objections of the Fund. The Fund regrets this action by a country which collaborated so effectively i:i the Fund1- establishment and whose cooperation has been a v::lu~blo asset, "The Fund will continue to work with Trrncc in seeking a nodification of theso oxchango prncticcs in order to ncot French needs within the frnnowork of the international monetary ^rrangoncnts established by the Fund Igrecnent."
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