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Thursday, 31 March 1966

Mr McMAHON - There are two methods of stating our overseas drawing rights, the one used by Australia and the other used by the International Monetary Fund. In our own case we have what we regard as two different sections, our first line reserves and our second line reserves. In the first branch we include our gold and our foreign exchange, and in our second line of reserves we include those funds that can be drawn upon in the International Monetary Fund. For our purposes, as we are a country which has strong overseas reserves, I think this is a sensible and wise method to follow. It does show clearly what our first line and our second line reserves are.

The International Monetary Fund has three components. It looks at its own holding of gold, holdings of foreign exchange and what it calls the reserve position of the country with the Fund. This reserve position represents the net lending by various countries to the International Monetary Fund. The International Monetary Fund puts all these amounts together and classifies them as the amounts which any individual country may draw upon. I think that in the case of the International Monetary Fund that is a wise procedure and a wise principle to follow. In the first case, any country can virtually draw upon these funds and can get the money more or less immediately. So I can understand the attitude of the International Monetary Fund. Much more importantly, I believe that the International Monetary Fund, knowing that there are grave doubts as to whether there are sufficient international reserves and sufficient free currency to permit increasing world trade, is anxious to improve the Fund facilities as quickly as it possibly can to the extent it can. As International Monetary Fund funds are a source of finance and one of the ways in which world trade can be assisted by liquid finance, I think the International Monetary Fund acts prudently and wisely in the interests of world trade.

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