Commission On I.M.F. BALANCE HEAVILY FAVOURS JOINING

Press, Volume C, Issue 29557, 5 July 1961, Page 12

Commission On I.M.F. BALANCE HEAVILY FAVOURS JOINING

IThe last of four extracts from the report of the Royal Commission on Monetary Banking, and Credit Systems, 1855-581

843. The view that the International Monetary Fund had failed to achieve its objectives and that many members had violated its rules and principles was given by some witnesses as a reason why New Zealand should not join. The Commission would make three comments on this view: (a) The measurement of success is always difficult and it would indeed be a bold man who would assert that conditions of world trade and finance would today be better if the International Monetary Fund and the International Bank had not been established. (b> It would not be reasonable to suggest that New Zealand withdraw from the United Nations because the success achieved has been less than many of us have hoped tor. (c) Like any organisation, the Fund has some members who do not fully observe its rules and principles. It is not always wise summarily to expel such members. Provided that there is some evidence of a desire generally to work towards the objectives of the organisation, it is often better to keep offenders within the framework of the Fund while making provision for continual consultation on the desirability of their policy. We do not therefore see any reason why New Zealand should stay outside the Fund because it has not expelled all members who have committed breaches of its rules. Arguments in Favour of Joining the Fund and Bank 844. The above list of objections to joining is not exhaustive, but covers the main points brought to the notice of the Commission. Arguments in favour of joining the Fund and Bank are now reviewed. 845. The International Monetary Fund and the International Bank tor Reconstruction and Development are a genuine attempt at international co-operation. New Zealand should certainly be able to subscribe to the main objectives which are: (1) International co-opera-tion. (ii) Stability in exchange rates and orderly changes when necessary. (ili) A reduction in exchange controls. (iv) Provision of supplementary exchange reserves in time of need. (v) Provision of capital tor the development of less-developed areas. Promotion of International Co-operation 846. On these points, Mr Ashwin said, “. . . it does pay os to be a member of any international organisation that tends to promote economic stability in the world generally and particularly stability in world trade. , . . We sell more than about 4# per cent, of our production overseas." 847. The Commission feels it highly desirable that there should be a forum, such as the Fund provides, tor the continuous study and review of the problems of international finance, with the object of facilitating cooperation in financial matters among the nations and making recommendations in good time to deal with any serious difficulties which might arise. New Zealand should make its due contribution in this field and not leave it to others. The work which the International Bank is doing in providing finance, and a certain amount of technical assistance, to under-developed areas is also worthy of support. Cemtnonwealth Co-operation MS. As a Commonwealth member whose future b inextricably bound up with that of the United Kingdom, and as a member of the sterling area, it b in New Zealand’s interest to join the International Monetary Fund. At present she b the only Commonwealth e o n n t r y which b not a member. Availability of Loans from Fund and Bank 849. In th* event of diffl-

cutties developing in regard to the balance of payments, we would have access through the Fund to additional monetary reserves (sterling and non-sterling currencies) of at least £lB million over a tout-year period. Though not substantial, these could be of some value in the event of depressed export markets; and there is the likelihood (judging by recent experience of several member countries) that the Fund would allow us greater or more rapid access to its resources in special circumstances. The potential value of the Fund as a means of Supplementing the exchange reserves of its members is not limited to the present rules and quotas. New Zealand might be accepted as a member with a higher quota than that agreed upon at Bretton Woods and thus be entitled to higher drawing rights. The Fund has already indicated that it can waive the limit on annual drawings, and quotas can be reviewed from time to time. 850. No witnesses questioned the success' of the International Bank Several Commonwealth countries, including India, Australia, and South Africa, have received substantial loans from it. New Zealand would be eligible for similar accommodation and as Mr Ashwin said, “It might be a useful source of capital st a time when we cannot provide for our own necessary development from our own resources or from money we can borrow in London.” However, to be .eligible to approach the Bank, we inust first join the Fund. As mentioned in the last section. Jt may well be that, at the present time, when the United Kingdom has dollar exchange difficulties of her own, New Zealand, instead of drawing on the sterling areas dollar pool, could assist by securing part of her dollar requirements tor capital goods by arranging a loan from the Bank. Conclusion 851. The Commission b of the opinion that the arguments In favour of joining the International Monetary Fund and International Bank for Reconstruction and Development heavily outweigh the objections to that course, and recommends that New Zealand should seek membership of these two world organisations.