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Authorized for public release by the FOMC Secretariat on 2/3/2021







January 17, 1975


Federal Open Market Committee


Arthur L. Broida

Attached for your information are copies of the
communiques issued following the meetings last week of the
Group of Ten Ministers and Central Bank Governors, and the
IMF Interim Committee.


Authorized for public release by the FOMC Secretariat on 2/3/2021

16th January, 1975


in Washington on 14th and 16th January, 1975.

1. The Ministers and Central Bank Governors of the ten countries participating in the General Arrangements to Borrow met in
Washington on the 14th and 16th of January, 1975, under the
Chairmanship of Mr. Masayoshi Ohira, Minister of Finance of Japan.
The Managing Director of the International Monetary Fund,
Mr. H. J. Witteveen, took part in the meetings, which were also
attended by the President of the Swiss National Bank,
Mr. F. Leutwiler, the Secretary-General of the OECD, Mr. E. van Lennep,
the General Manager of the Bank for International Settlements,
Mr. R. Larre, and the Vice-President of the Commission of the E.E.C.,
Mr. W. Haferkamp.
After hearing a report from the Chairman of their Deputies,
Mr. Rinaldo Ossola, the Ministers and Governors agreed that a
solidarity fund, a new financial support arrangement, open to all
members of the OECD, should be established at the earliest possible

date, to be available for a period of two years. Each participant
will have a quota which will serve to determine its obligations and
borrowing rights and its relative weight for voting purposes. The
distribution of quotas will be based mainly on GNP and foreign trade.
The total of all participants' quotas will be approximately $25 billion.
The aim of this arrangement is to support the determina3.
tion of participating countries to pursue appropriate domestic and
international economic policies, including cooperative policies to
encourage the increased production and conservation of energy.
It was agreed that this arrangement will be a safety net, to be
used as a last resort. Participants requesting loans under the new
arrangement will be required to show that they are encountering
serious balance-of-payments difficulties and are making the fullest
appropriate use of their own reserves and of resources available
to them through other channels. All loans made through this
arrangement will be subject to appropriate economic policy conditions. It was also agreed that all participants will jointly share
the default risks on loans under the arrangement in proportion to,

and up to the limits of, their quotas.

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In response to a request by a participant for a loan, the
other participants will take a decision, by a two-thirds majority,
on the granting of the loan and its terms and conditions, in the case
of loans up to the quota, and as to whether, for balance-of-payments
reasons, any country should not be required to make a direct contribution in the case of any loan. The granting of a loan in excess
of the quota and up to 200 per cent of the quota will require a very
strong majority and beyond that will require a unanimous decision.
If one or more participants are not required to contribute to the
financing of a loan, the requirements for approval of the loan must
also be met with respect to the contributing participants.
Further work is needed to determine financing methods.
These might include direct contributions and/or joint borrowing in
capital markets. Until the full establishment of the new arrangement, there might also be temporary financing through credit
arrangements between central banks.
Ministers and Governors agreed to recommend the immediate
establishment of an ad hoc OECD Working Group, with representatives
from all interested OECD countries, to prepare a draft agreement in
line with the above principles. In their view this work should be
concluded in time to permit approval by the OECD Council by the end
of February, 1975.

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19th and H Streets N. W., Washington, D.C.



January 16, 1975

Press Communiqué of the Interim Committee of the Board
of Governors on the International Monetary System

The Interim Committee of the International Monetary Fund held its
second meeting in Washington, D.C. on January 15 and 16, 1975.
Mr. John N. Turner, Minister of Finance of Canada, was in the chair.
Mr. H. Johannes Witteveen, Managing Director of the International Monetary
Fund, participated in the meeting. The following observers attended
during the Committee's discussions of the matters referred to in paragraphs 2, 3, and 4 below: Mr. Henri Konan Bedié, Chairman, Bank-Fund
Development Committee; Mr. Gamani Corea, Secretary General, UNCTAD;
Mr. Wilhelm Haferkamp, Vice President, EC Commission; Mr. Mahjoob A.
Hassanain, Chief, Economics Department, OPEC; Mr. Rene Larre, General
Manager, BIS; Mr. Emile van Lennep, Secretary General, OECD; Mr. Olivier
Long, Director General, GATT; Mr. Robert S. McNamara, President, IBRD.
The Committee discussed the world economic outlook and against this
Great concern was
background the international adjustment process.
expressed about the depth and duration of the present recessionary conditions. It was urged that anti-recessionary policies should be pursued
while continuing to combat inflation, particularly by countries in a
relatively strong balance of payments position. It was observed that
very large disequilibria persist not only between major oil exporting
countries as a group and all other countries, but also among countries
in the latter group, particularly between industrial and primary producing
Anxiety was also voiced that adequate financing might not
become available to cover the very large aggregate current account deficits,
of the order of US$30 billion, in prospect for the developing countries
other than major oil exporters in 1975.
The Committee agreed that the Oil Facility should be continued for
They urged the Managing Director to undertake
1975 on an enlarged basis.
as soon as possible discussions with major oil exporting members of the
Fund, and with other members in strong reserve and payments positions,
on loans by them for the purpose of financing the Facility. The Committee
agreed on a figure of SDR 5 billion as the total of loans to be sought for
this purpose. It was also agreed that any unused portion of the loans
negotiated in 1974 should be available in 1975. The Committee agreed that

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in view of the uncertainties inherent in present world economic conditions,
it was necessary to keep the operation of the Oil Facility under constant
review so as to be able to take whatever further action might be necessary
in the best interests of the international community. It was also understood that during the coming months it would be useful to review the
policies, practices, and resources of the Fund since it would be appropriate to make increased use of the Fund's ordinary holdings of currency
to meet the needs of members that were encountering difficulties.
The Committee emphasized the need for decisive action to help the
most seriously affected developing countries. In connection with the
Oil Facility, the Committee fully endorsed the recommendation of the
Managing Director that a special account should be established with
appropriate contributions by oil exporting and industrial countries, and
possibly by other members capable of contributing, and that the Fund
should administer this account in order to reduce for the most seriously
affected members the burden of interest payable by them under the Oil
The Committee considered questions relating to the sixth general
review of the quotas of members, which is now under way, and agreed,
subject to satisfactory amendment of the Articles, that the total of
present quotas should be increased by 32.5 per cent and rounded up to
SDR 39 billion. It was understood that the period for the next general
review of quotas would be reduced from five years to three years. The
Committee also agreed that the quotas of the major oil exporters should
be substantially increased by doubling their share as a group in the
enlarged Fund, and that the collective share of all other developing
countries should not be allowed to fall below its present level. There
was a consensus that because an important purpose of increases in quotas
was strengthening the Fund's liquidity, arrangements should be made under
which all the Fund's holdings of currency would be usable in accordance
with its policies. The Committee invited the Executive Directors to
examine quotas on the basis of the foregoing understandings, and to make
specific recommendations as promptly as possible on increases in the
quotas of individual member countries.
The Committee considered the question of amendment of the
Articles of Agreement of the Fund. It was agreed that the Executive
Directors should be asked to continue their work on this subject and, as
soon as possible, submit for consideration by the Committee draft amendments on the following subjects:
(a) The transformation of the Interim Committee into a permanent
Council at an appropriate time, in which each member would be able to
cast the votes of the countries in his constituency separately. The
Council would have decision-making authority under powers delegated to
it by the Board of Governors.
(b) Improvements in the General Account, which would include
(i) elimination of the obligation of member countries to use gold to
make such payments to the Fund as quota subscriptions and repurchases

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- 3-

and the determination of the media of payment, which the Executive
Directors would study, and (ii) arrangements to ensure that the Fund's
holdings of all currencies would be usable in its operations under
satisfactory safeguards for all members.
(c) Improvements in the characteristics of the SDR designed to
promote the objective of making it the principal reserve asset of the
international monetary system.
(d) Provision for stable but adjustable par values and the floating
of currencies in particular situations, subject to appropriate rules and
surveillance of the Fund, in accordance with the Outline of Reform.
II. The Committee also discussed a possible amendment that would
establish a link between allocations of SDRs and development finance,
but there continues to be a diversity of views on this matter. It was
agreed to keep the matter under active study, but at the same time to
consider other ways for increasing the transfer of real resources to
developing countries.
The Committee also agreed that the Executive Directors should be
asked to consider possible improvements in the Fund's facilities on the
compensatory financing of export fluctuations and the stabilization of
prices of primary products and to study the possibility of an amendment
of the Articles of Agreement that would permit the Fund to provide
assistance directly to international buffer stocks of primary products.
There was an intensive discussion of future arrangements for gold.
The Committee reaffirmed that steps should be taken as soon as possible
to give the special drawing right the central place in the international
monetary system. It was generally agreed that the official price for
gold should be abolished and obligatory payments of gold by member
countries to the Fund should be eliminated. Much progress was made in
moving toward a complete set of agreed amendments on gold, including
the abolition of the official price and freedom for national monetary
authorities to enter into gold transactions under certain specific
arrangements, outside the Articles of the Fund, entered into between national
monetary authorities in order to ensure that the role of gold in the
international monetary system would be gradually reduced. It is expected
that after further study by the Executive Directors, in which the interests
of all member countries would be taken into account, full agreement can
be reached in the near future so that it would be possible to combine
these amendments with the package of amendments as described in paragraphs 6 and 7 above.
The Committee agreed to meet again in the early part of June, 1975
in Paris, France.