TABLE 7.-Net credits authorized by the Export-Import Bank, July 1, 1945, to June 30, 1950; and July 1, 1950, to Dec. 31, 1954, by area and country TABLE 7.-Net credits authorized by the Export-Import Bank, July 1, 1945, to June 30, 1950; and July 1, 1950; to Dec. 31, 1954, by area and country-Con. 1 Credits authorized in the period from July 1, 1950, to Dec. 31, 1954, inclusive, less cancellations and expirations applicable thereto. * Includes exporter credits. Credits authorized in the period from July 1, 1945, to June 30, 1950, inclusive, less cancellations and expirations applicable thereto through Dec. 31, 1954. Source: Based on data supplied by the Export-Import Bank. VI. OTHER FINANCIAL DEVELOPMENTS MOVEMENT OF GOLD AND SHORT-TERM CAPITAL 23 The continued accumulation of gold reserves and dollar holdings by foreign countries was sustained during 1954, when additions amounted to about $2 billion. This rise reflects the further improvement of economic conditions abroad and the favorable balance-of-payments position of many free nations of the world. The gold reserves and dollar holdings of continental Western European countries rose $1.6 billion last year, while those of the Sterling Area as a group increased only $200 million. Sterling Area holdings actually declined to some extent in the last half of 1954, as the United Kingdom repaid outstanding indebtedness to the European Payments Union and the International Monetary Fund and made annual yearend payments of principal and interest to the United States. Dollar holdings of Asian countries, after declining in the first half of 1954, rose somewhat in the second half largely as a result of the improved Japanese balance-of-payments position. Growth in foreign gold reserves and dollar holdings has been accompanied by a gradual lessening of trade and exchange restrictions. by many foreign countries. This has facilitated the international movement of short-term capital in response to interest rate differentials between financial centers and also in response to the need for temporary financing of trade imbalances arising from seasonal or other factors. Private short-term capital flows provide an additional means of financing temporary balance-of-payments deficits and, from this point of view, may supplement official reserves. Also, as a stabilizing factor in the international economy, the flow of short-term capital complements the international flow of long-term investment funds, which contribute to economic growth and rising standards of living. See appendix A, for data on gold and dollar resources of foreign countries and]United¡States'gold transactions with foreign countries. During 1954 United States banks were increasingly active in extending credits to foreigners and in placing funds in foreign money markets. Outstanding credits to foreigners reported by United States commercial banks rose $460 million during this period, partially reflecting greater freedom of international currency transactions and partially representing the financing of United States exports on credit terms in order to meet foreign competition. Of the total increase in commercial bank credits $360 million represents growth in outstanding short-term credit (maturing in less than 1 year) to foreigners. This includes a rise of $120 million in short-term claims on Latin America, as credits were extended to various countries there to finance United States trade, and an increase of $100 million in claims on the United Kingdom, as United States banks placed funds in the London market. Credits to foreigners other than short term, the outstanding amount of which rose $100 million over the year, are mostly of intermediate maturity (1 to 4 years) and largely represent loans fully secured by gold or United States Government securities and loans entered into by commercial banks under Export-Import Bank guaranty. MUTUAL SECURITY LOAN PROGRAM FOR FISCAL 1955 During the current period the Council considered the financial aspects of the Mutual Security loan program for the fiscal year 1955 submitted by the Foreign Operations Administration. Under the Mutual Security Act of 1954,24 assistance to friendly nations may be furnished on a grant basis or on terms of repayment.25 Such terms may include repayment in foreign currencies or by transfer to the United States of materials required for stockpiling or for other purposes. Of the funds made available pursuant to the Mutual Security Act, as well as foreign currencies accruing to the United States from the sale of surplus agricultural commodities under the authority of the Act, the equivalent of not less than $200 million may be provided as assistance only on terms of repayment. TERMS OF LOANS UNDER THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954 Throughout the 6-month period, the Council reviewed the financial policy considerations relating to loans under the Agricultural Trade Development and Assistance Act of 1954.26 The Act provides that, over a 3-year period, agricultural surplus commodities, not in excess of $700 million in value, may be sold abroad through private trade channels for local currencies, and in addition up to $300 million of such commodities may, under certain conditions, be transferred to friendly governments on a grant basis. The United States is authorized to relend to the purchasing country a substantial portion of local currencies received. The foreign currencies accruing under the Act are to be used to expand international trade, to encourage economic development, to purchase strategic materials, to pay United States obligations abroad, to promote collective strength, and to foster in other ways the foreign policy of the United States. 24 Public Law 665, 83d Cong., 2d sess., approved August 26, 1954. 25 See appendix B for data on this as well as other U. S. Government foreign aid since July 1, 1950. 26 Public Law 480, 83d Cong., 2d sess., approved July 10, 1954. The negotiation and conclusion of loan agreements under the Act have, by Executive order, been assigned to the Director of the Foreign Operations Administration, and the terms and conditions of such loans are expected to be generally similar to those applying to loans made under section 505 of the Mutual Security Act of 1954. Through December 31, 1954, detailed programs had been completed covering sales of approximately $200 million of surplus commodities to four countries. STATUS OF LOCAL CURRENCY COUNTERPART FUND ACCOUNTS Under the Mutual Security Act of 1954, the requirement for the deposit of counterpart was broadened to apply to all countries realizing TABLE 8.-Summary of local currency counterpart fund accounts, by program (area), and status, as of Dec. 31, 1954 [Dollar equivalent of local currencies, in millions of dollars] 1 Represents country deposits adjusted for exchange rate fluctuations plus repayments of loan principal and interest; also reflects net transfers, principally unencumbered balances from Public Laws 84 and 389 (80th Cong.) counterpart deposits and transfers to the GARIOA account in Germany. Excludes German GARIOA counterpart funds. ? Includes Greece and Turkey, but excludes Iran whose local currency account prior to July 1, 1954, was not a true counterpart account, and for which more recent data are not available. Less than the equivalent of $50,000. NOTE.-Detail will not necessarily add to totals because of rounding. Source: Foreign Operations Administration. local currency proceeds in connection with the receipt of nonmilitary grant aid. The reservation of a fixed minimum amount for United States use is not required by the Act, although countries must make available whatever amounts are necessary to meet United States needs. It is expected, however, that where existing bilateral agreements call for transfer of 5 or 10 percent counterpart to United States accounts, these minimum transfers will be continued. From the beginning dates of the various aid programs through December 31, 1954, the local currency equivalent of $13.1 billion had been deposited in the various counterpart accounts. Of this amount $679 million was transferred for use by the United States, and $11.5 billion of the remainder had been approved for withdrawal by recipient countries (see table 8). During the period under review, the equivalent of approximately $379 million was released to foreign countries under all programs for agreed-upon purposes. 64242-55 |