September 1 H. September The Deputies of the Committee of Twenty met in Paris and failed to agree on arrangements for a reformed international monetary system. Later, at a meeting of the Committee of Twenty, held in Nairobi in conjunction with the Annual Meeting of the Board of Governors, it became clear that there would be no early agreement on reforming the system. The meeting was a forerunner of future crude oil price increases that would disrupt the world economy throughout the s.
December 23 Six oil exporting countries again announced increases in the prices of crude oil, thus nearly quadrupling prices that had come into effect three months earlier. January The Committee of Twenty, meeting in Rome, suspended efforts for a full-scale reform of the international monetary system. The Fund staff presented the Committee with its estimate that in the aggregate balance of payments deficit of developing countries would be of an unprecedented magnitude.
May The Deputies of the Committee of Twenty completed a draft of a revised Outline of Reform and discussed the immediate steps required to move existing arrangements forward. June The Deputies of the Committee of Twenty held a final meeting and completed their recommendations.
June At its final meeting, the Committee of Twenty agreed on a number of immediate steps to help the international monetary system evolve and on an Outline of Reform that the international monetary authorities should endeavor to work out and implement in the future. The immediate steps included the establishment of an Interim Committee, with advisory powers; the adoption of a method of valuing the SDR based on a basket of 16 currencies; establishment of guidelines for the management of floating exchange rates; establishment of an oil facility in the Fund; provision for members to pledge, on a voluntary basis, not to intensify restrictions; early adoption of an extended facility in the Fund, whereby developing countries could use Fund financing on terms of up to 10 years to address structural changes in their economies; and the establishment of a committee to study the question of the transfer of real resources to developing countries.
July 1 The Fund introduced a new method of valuing the SDR, based on a basket of the 16 currencies most used in world trade instead of gold. August 22 First use was made of the oil facility. September 13 An extended facility was established in the Fund to give medium-term assistance to developing member countries.
September 30 The Managing Director proposed that another larger oil facility be established for It was also agreed that under the sixth general review total quotas should be increased from SDR March 14 An oil facility for was established. November The first economic summit meeting was held by six industrial nations in Rambouillet, France. The U. December 24 The compensatory financing facility, which had been established in and liberalized in , was further liberalized. April 30 The Board of Governors approved the proposed second amendment to the Articles of Agreement, which was then submitted to member governments for acceptance and ratification.
May 5 The Fund announced a program to dispose of one-third of its gold holdings, one-sixth to be sold by auction over a two-year period and one-sixth to be restituted to members. The Trust Fund was established. November 3 Participants in the General Arrangements to Borrow agreed that Japan should almost quadruple its commitment under the arrangements, thereby raising the total amount available to about SDR 6. January 25 The Fund made the first loans to 12 members from the Trust Fund.
February 23 The Fund completed the first of four annual restitutions of gold to its members, amounting to six million ounces, sold at the official price of SDR 35 an ounce to members in proportion to their quotas. It agreed on three broad principles: 1 members should avoid manipulating exchange rates to gain unfair advantage; 2 members should intervene in exchange markets to counter disorderly conditions; and 3 members should take into account in their intervention policies the interests of other members.
August 6 The Managing Director invited 14 potential lenders to the Fund to meet in Paris to discuss the amounts and terms on which they would lend to the Fund to establish a supplementary financing facility in the Fund. August 29 The supplementary financing facility was established, to become effective when loan commitments totaling not less than SDR 7. April 1 The second amendment to the Articles of Agreement went into effect, after three-fifths of the membership representing four-fifths of total voting power had accepted the increases. The relevant resolution had been submitted to the membership on April 30, , and its acceptance by the requisite number of members and votes had taken nearly two years.
April The Interim Committee, meeting in Mexico City, agreed on a coordinated strategy to regenerate growth in a stagnant world economy. The Committee also agreed on an allocation of SDRs of SDR 4 billion in each of the three years , , and , the third basic period. February 23 The supplementary financing facility became operative after lending commitments had reached SDR 7. Such an account had been discussed extensively by the Committee of Twenty and other bodies as part of the reform of the international monetary system.
March 13 The European Monetary System came into existence. August 24 The General Arrangements to Borrow were renewed, for the fourth time, for another five years, until October 23, December 3 The maximum repayment period under the extended facility was increased from eight to 10 years. April 25 The Interim Committee, meeting in Hamburg, agreed that the Fund should play a growing role in the adjustment and financing of payments imbalances and the recycling of funds of surplus balance of payments countries to members in balance of payments deficit.
It was recognized that further Fund borrowing and longer terms of repayment for members in balance of payments deficit were needed.
The Committee, reversing a position that it had taken earlier, concluded that agreement on a substitution account was unlikely in the foreseeable future. May 7 The gold sales program agreed in August was completed. Under the program, 25 million ounces of gold had been sold restituted to countries that were members of the Fund on August 31, , at the official price of SDR 35 an ounce. In addition, 25 million ounces of gold had been auctioned over a four-year period, raising a total of SDR 4.
September 17 The Executive Board took a number of decisions to enhance the attractiveness of the SDR, the most important of which were reducing the basket from 16 to five currencies U. December 17 A subsidy account for the supplementary financing facility was established. March 31 The final loan disbursement from the Trust Fund, which was established in May , brought total disbursements from the Trust to SDR 3 billion. May After the Executive Board had authorized the Managing Director to borrow from the Saudi Arabian Monetary Agency, the Fund concluded an agreement under which the Agency would lend the Fund SDR 4 billion in the first year of the commitment period and up to SDR 8 billion in the second year of a six-year commitment period.
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These commitments enabled the enlarged access policy to become operative. May 13 The compensatory financing facility was again amended to cover financing to members that encountered balance of payments difficulties caused by an excessive rise in the cost of cereal imports that were largely beyond the control of the member. The amendment was expected to be of particular benefit to low-income countries.
May 21 The Interim Committee, meeting in Gabon, emphasized the need for effective adjustment policies among members and urged the Executive Board to work on the eighth general review of quotas. June 9 As required under the Articles, the Managing Director consulted with participants in the SDR facility and found no consensus in favor of allocations for the fourth basic period, to begin on January 1, August 4 The Fund reached agreement with the Bank for International Settlements and with the central banks or monetary agencies of 16 industrial countries to lend the Fund the equivalent of SDR 1.
While agreeing that the Fund should continue its borrowing efforts, the Committee stressed that the Fund should rely on quota increases as the basic source for its funds and urged that the eighth general review of quotas be expedited. August 13 Mexico closed its foreign exchange market in the face of serious difficulty in servicing its foreign debt.
This marked the onset of the debt crisis that was to affect many developing countries in the ensuing years. January 24 The Fund approved a stand-by arrangement and compensatory financing drawing for Argentina totaling SDR 2 billion. November 30 The increased quotas under the eighth general review went into effect. Similarly, the limits under the compensatory financing facility were reduced, as were those set for the buffer stock financing facility.
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November 16 The policy of enlarged access was extended to the end of and access limits were reduced in accordance with the request of the Interim Committee. May 3 The Executive Board extended for four years, until May , the coverage of the compensatory financing facility to cereal imports. September 25 Members of the Group of Five met in New York and agreed to pursue a policy of coordinated intervention in the foreign exchange markets to reduce the value of the dollar.
October The Interim Committee, meeting in Seoul, stressed the need for noninflationary growth policies for industrial countries, for renewed growth in developing countries, and for adequate financing support of developing countries in their adjustment efforts. November 23 The General Arrangements to Borrow were renewed for a period of five years from December 26, December 18 The enhanced structural adjustment facility was established. The interest rate on loans was set at 0. June 6 The mix of ordinary and borrowed resources for purchases under the enlarged access policy was set at the ratio of two to one in the first credit tranche and one to two in the next three credit tranches.
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Thereafter, purchases were to be made with borrowed resources. Purchases under extended arrangements were to be made with ordinary resources up to percent of quota, and thereafter with borrowed funds. June 28 The Board of Governors adopted a resolution that increased by 50 percent the quotas of members under the ninth general review of quotas; no increase was to become effective until members having not less than either 85 percent or 70 percent depending on whether the determination was made before or after December 30, of total quotas had consented to the increase and not before the effective date of the third amendment of the Articles.
The proposed third amendment to the Articles of Agreement was also adopted by the Board of Governors on this date. October 5 The Executive Board reviewed the currencies and their weights making up the SDR basket and determined that the list of currencies and their weights should be as follows: the U. December 5 In view of the Middle East crisis, the Executive Board took a number of decisions to help members face unexpected economic difficulties. The measures included 1 suspending, until the end of , the lower annual, three-year, and cumulative borrowing limits under the enlarged access policy; 2 increasing the financing under the enhanced structural adjustment policies at the time of midyear reviews for such arrangements and, where necessary, adding a fourth year to those programs due to be completed before November ; 3 adding an oil import element to the compensatory and contingency financing facility; and 4 providing for a contingency mechanism to be attached to current Fund arrangements at the time that they come up for review.
November 9 The Executive Board announced new access limits on the amounts of financing available to members that would apply once the 50 percent increase in quotas under the ninth general review of quotas went into effect. It terminated the enlarged access policy in effect since , under which the Fund supplemented its quota resources with borrowed funds. April 27 Tajikistan was the fifteenth and the last of the countries of the former Soviet Union to join the Fund.
The devaluations were followed in the ensuing weeks by Fund arrangements for 13 of the countries.
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February 23 The Executive Board initiated operations under the renewed and enlarged enhanced structural adjustment facility. October 2 The Interim Committee adopted the Madrid Declaration calling industrial countries to sustain growth, reduce unemployment, and prevent a resurgence of inflation; developing countries to extend growth; and transition economies to pursue bold stabilization and reform efforts. September 12 Emergency financing mechanism approved by the Executive Board. April 16 The Fund established a voluntary special data dissemination standard for member countries having, or seeking, access to international capital markets.
A general data dissemination system would be implemented later. September The Interim and Development Committees endorsed a joint initiative for heavily indebted poor countries. July 2 Thailand introduced a managed float for its currency, the baht, followed by a prompt depreciation of the currency of about 20 percent. July 11 Following increased pressure on its reserves, accentuated by the float of the baht a few days earlier, the Philippine authorities allowed the peso to float.
August 4 The Executive Board adopted guidelines covering the role of the Fund on the issue of governance. October 11 Indonesia adopted the first of its economic programs to cope with the Asian economic and financial crisis. Fund assistance was requested by Korea on November 21, and negotiation of the arrangement was concluded with unprecedented speed.