States Executive Director on basic elements of United States policy with respect to the consultations, and supported the Fund procedure of making recommendations on the basis of an objective appraisal of the problems and needs of each country.

Stand-by arrangements

For a considerable period, the policies and practices of the Fund with respect to the use of its resources have been under careful review by the Executive Board and Fund Staff. During February 1952, the Fund emphasized the short-term character of the use of Fund resources by deciding that, "as a general rule, any increase in the Fund's holdings of a member's currency originating from transactions by the member should be reduced within a period not exceeding 3 to 5 years." Previously, the Fund Board had adopted a new schedule of charges which were intended to discourage extended use of the Fund's resources. These decisions were designed to assist in making more effective use of these resources by insuring that their use is temporary, as was contemplated by the Articles of Agreement.14

During the period under review the Fund, as a further step toward making more effective use of its resources, considered procedures to guide the negotiation of stand-by arrangements with member countries. Such arrangements would be designed to give assurance to a member that, during a definite period, transactions up to a specified amount would be made at the request of the member without further consideration of its position, unless the ineligibility provisions of the Fund agreement were invoked against the member. arrangement of this sort had been made with Belgium in June 1952, as discussed below.

The Fund Executive Board on October 1, 1952, adopted the procedures for stand-by arrangements. The arrangements are to be limited to periods of not more than 6 months but may be renewed by a decision of the Fund Executive Board. In considering requests for stand-by arrangements, the Fund will apply the same policies that are applied to requests for immediate drawings of currencies held by the Fund. A charge of one-fourth of 1 percent per annum is payable to the Fund at the time a stand-by arrangement is agreed. This policy regarding stand-by arrangements will be effective until December 31, 1953, and will be reviewed by the Executive Board before that date.

The National Advisory Council supported the decision of the Fund Board and believes that arrangements of this type should enable a member country to take a broader view of the measures it can reasonably apply in meeting its short-term payments problems.

Exchange systems and quotas

Honduras.-The Board of Governors on April 21 approved a change in the quota of Honduras, from $500,000 to the level of $2.5 million originally agreed upon at Bretton Woods. The change in quota, requested by Honduras, was accepted by that country on April 29,

1952.

Paraguay. On August 1, 1952, the Fund announced that it interposed no objections, as a temporary arrangement, to certain proposed 14 See H. Doc. No. 523, 82d Cong., 2d sess., pp. 25, 26.

changes in Paraguay's foreign exchange system. These changes provided for a basic buying and selling rate of 15 guaranies per United States dollar in place of the two former official rates of 6 and 9 guaranies per United States dollar. Payments for less essential imports were to be made at effective rates of 21 and 30 guaranies per dollar, certain essential imports were to utilize a subsidized selling rate of 9 guaranies per dollar, and an effective rate of 6 guaranies per dollar was to apply to government nontrade payments. Provision was made for a free market for other invisibles. Certain stabilization measures were to accompany the application of the new exchange system, and the Fund announced that it would remain in consultation with Paraguay.

Finland. During August, the Fund raised no objection to the introduction by Finland of preferential rates for foreign bank notes, coins, travelers checks and letters of credit sold in Finland by foreign tourists in limited amounts. The transactions will be carried on by commercial banks, and Finland will continue to consult with the Fund on the necessity for the retention of this practice.

Exchange transactions

During the period under review, the Fund sold, or entered into arrangements to sell, currencies in the equivalent of $90,875,000 to four of its member countries:

Australia. On April 30, 1952, the Fund announced that the Government of Australia had arranged for the purchase, to be completed by September 30, 1952, of $30 million from the Fund for the equivalent in Australian pounds. This transaction was consummated during August 1952. In connection with the current transaction, the Australian Government has indicated its intention of repurchasing, within 3 to 5 years, the Australian pounds involved in this and an earlier transaction of $20 million effected in October 1949.

Paraguay. During June 1952, the Government of Paraguay purchased $875,000 from the Fund for Paraguayan guaranies. This purchase, which is Paraguay's first transaction with the Fund, raised to 21 the number of Fund members that have purchased other members' currencies from the Fund.

Belgium. In order to assist the Government of Belgium to continue to direct its policies in accord with the Fund's objectives, an arrangement was completed on June 19, 1952, permitting Belgium, for a period of 6 months, to purchase with Belgian francs, on a revolving basis, up to the equivalent of $50 million in currencies held by the Fund. The agreement is renewable for additional 6-month periods, unless either Belgium or the Fund determine that conditions have been basically altered so that the arrangement should be terminated. In any event, the arrangement will not extend beyond 5 years. this service, Belgium paid a fee of one-fourth of 1 percent, which will be in addition to the regular service charge payment on account of any actual purchases of currency from the Fund. Belgium will continue to consult with the Fund on its payments situation and general policies. 15

For

15 Up to September 30, 1952, Belgium had not found it necessary to purchase currencies from the Fund under this arrangement.

27691-53

TABLE XV.-International Monetary Fund currency sales, Mar. 1, 1947, to Sept. 30, 1952

Turkey. On July 14, 1952, the Fund announced a purchase of $10 million with Turkish liras by the Government of Turkey-its second currency transaction with the Fund. In 1947, Turkey purchased $5 million with liras, and repurchased the liras during May 1952. Repurchase transactions

During the period under review, six member governments of the Fund Chile, Turkey, Syria, Brazil, Peru, and the Netherlandsrepurchased amounts of their currencies held by the Fund with payments of $104,813,836 in gold and United States dollars. In addition

TABLE XVI.—International Monetary Fund repurchase transactions, Mar. 1, 1947, through Sept. 30, 1952

to voluntary repurchases of its currency, a repurchase obligation arises under certain conditions relating to the member's monetary reserves and its purchases of currencies from the Fund, under the provisions of article V, section 7 (b) of the Fund's Articles of Agreement.

Repurchase transactions of the Fund, including mandatory as well as voluntary repurchases, amounted to $184,693,539 on September 30, 1952 and are shown in table XVI.

Relations with member countries

In the course of the fiscal year ended April 30, 1952, the Fund has maintained effective relations with member countries through its missions and technical visits, training programs, and publications and information. During this period, representatives of the Fund staff visited 37 member countries for informal discussions or on technical assignment. Nine additional countries were visited through September 30, 1952. Through these visits, the Fund made its technicians available to member countries for assistance in drafting new banking legislation, advising on an import certificate system, and reviewing policies and practices bearing on exchange rates and exchange controls. The Fund staff also consulted with member countries on problems relating to banking and fiscal reform in their relation to exchange policy as well as on the collection and interpretation of balance-ofpayments and other statistical data.

THE BANK

Loans granted during the 6-month period covered by the present Report amounted to $163,104,000 and brought the total of all Bank lending net of expirations, cancellations, and refundings-to $1%1⁄2 billion on September 30, 1952. This lending covers only a part of the total cost of the projects-amounting to over $3 billion-completed or in the process of being carried out with the help of Bank financing. Cumulative disbursements on loans to September 30, 1952, totaled $933,728,779.

In the following description of loans announced by the Bank during the period under review, the interest rate stated for each loan includes the 1 percent commission which, under the Articles of Agreement, is allocated to the Bank's special reserve.

New loan commitments

Finland. On April 30, 1952, the Bank announced a loan of $20 million to the Bank of Finland-the third loan made by the Bank to that country. The loan, guaranteed by the Government of Finland, will assist in financing the import of equipment needed to expand and modernize the wood products industry, to increase the supply of electric power and to improve farm lands and build forest roads. The Bank of Finland will relend the proceeds of the loan to both private and Government-owned corporations, and additional funds required to complete the projects will be provided from Finnish sources. The loan is for a term of 18 years, with an interest rate of 44 per cent. Amortization payments will begin on December 1, 1955. Pakistan. The Bank, on June 14, 1952, announced its second loan for the economic development of Pakistan. In March 1952, a loan of $27.2 million was made to the Government of Pakistan for the modernization, improvement, and rehabilitation of the railways. The