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Tuesday, 16 September 1958

Washington,

August 26. 1958.

Dear Mr. Secretary.

I have read with great interest your letter concerning the adequacy of the present resources of the International Monetary Fund and the International Bank for Reconstruction and Development.

I thoroughly agree with you that the well-being of the free world is vitally affected by the progress of the nations in the less developed areas as well as the economic situation in the more industrialized countries. A sound and sustainable rate of economic growth in the free world is a central objective of our policy.

It is universally true, in my opinion, that governmental strength and social stability call for an economic environment which is both dynamic and financially sound. Among the principal elements in maintaining such an economic basis for the free world are (1) a continuing growth in productive investment, international as well as domestic; (2) financial policies that will command the confidence of the public, and assure the strength of currencies; and (3) mutually beneficial international trade and a constant effort to avoid hampering restrictions on the freedom of exchange transactions.

During the past year, as you know, major advances have been made in our own programs for dealing with these problems. These include an increase in the lending authority of the ExportImport Bank; establishment of the Development Loan Fund on a firmer basis through incorporation and enlargement of its resources; extension and broadening of the Reciprocal Trade AgreementsAct; and continuation of the programs carried forward under the Agricultural Trade Development and Assistance Act.

Our own programs, however, can do only a part of the job. Accordingly as we carry them forward, we should also seek a major expansion in the international programs designed to promote economic growth with the indispensable aid of strong and healthy currencies.

As you have pointed out, the International Bank for Reconstruction and Development and the International Monetary Fund are international instruments of proved effectiveness already engaged in this work. While both institutions still have uncommitted resources, I am convinced that the time has now come for us to consider, together with the other members of these two agencies, how we can better equip them for the tasks of the decade ahead.

Accordingly, I request, assuming concurrence by the interested members of the Congress with whom you will consult, that you take the necessary steps in conjunction with the National Advisory Council on International Monetary and Financial Problems, to support a course of action along the following lines:

First: In your capacity as United States Governor of the International Monetary Fund, I should like to have you propose, at the Annual Meeting of the Fund at New Delhi in October, that prompt consideration be given to the advisability of a general increase in the quotas assigned to the member governments.

The past ten years testify to the important role played by the International Monetary Fund in assisting countries which, from time to time, have encountered temporary difficulties in their balance of payments.

We are now entering a period when the implementation of effective and sound economic policies may be increasingly dependent in many countries upon the facilities and technical advice which the Fund can make available as they meet temporary external financial difficulties. This is particularly true of the less developed countries with the great variability in foreign exchange receipts to which they are subject from time to time. It also applies to industralized countries which are dependent on foreign trade. Through its growing experience and increasingly close relations with its members, the Fund can also help see to it that countries are encouraged to pursue policies that create stable financial and monetary conditions while contributing to expanding world trade and income. The International Monetary Fund is uniquely qualified to harmonize these objectives but its present resources do not appear adequate to the task.

Second: In your capacity as United States Governor of the International Bank for Reconstruction and Development, I should like to have you propose, at the Annual Meeting of the Bank, that prompt consideration be given to the advisability of an increase in the authorized capital of the Bank and to the offering of such additional capital for subscription by the Bank's member governments. Such additional capital subscriptions, if authorized, would not necessarily require additional payments to be made to the Bank; they would, however, ensure the adequacy of the Bank's lending resources for an extended period by strengthening the guarantees which stand behind the Bank's obligations.

The demands upon the Bank for development loans have been increasing rapidly, and it is in a position to make a growing contribution tothe economic progress of the free world in the period which lies ahead. Moreover, it can do this by channeling the savings of private investors throughout the world into sound loans, repayable in dollars or other major currencies. But to meet the rising need for such sound development loans, it must be able to raise the funds in the capital markets of the free world. An increase in the Bank's subscribed capital, by increasing the extent of the responsibility of member governments for assuring that the Bank will always be in a position to meet its obligations, would enable the Bank to place a larger volume of its securities in a broader market, while still maintaining the prime quality of its securities and hence the favorable terms on which it can borrow and relend funds.

Third: With respect to the proposal for an International Development Association, I believe that such an affiliate of the International Bank, if adequately supported by a number of countries able to contribute, could provide a useful supplement to the existing lending activities of the Bank and thereby accelerate the pace of economic development in the less developed member countries of the Bank. In connection with the study of this matter that you are undertaking in the National Advisory Council pursuant to the Senate Resolution, I note that you contemplate informal discussions with other member governments of the Bank's responsibilities along these lines. If the results indicate that the creation of the International Development Association would be feasible, I request that, as a third step, you initiate promptly negotiations looking toward the establishment of such an affiliate of the Bank.

The three-point program I have suggested for consideration would require intensified international cooperation directed to a broad attack upon some of the major economic problems of our time. A concerted and successful international effort along these lines would, I feel certain, create a great new source of hope for all those who share our conviction that with material betterment and free institutions flourishing side by side we can look forward with confidence to a peaceful world.

Sincerely, Dwight D. Eisenhower.

The Honorable Robert B. Anderson, Secretary to the Treasury, Washington, D.C.

Interest Rates.

 







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