Letter to the President of the Senate and to the Speaker of the House Transmitting Bill To Authorize U.S. Loans to the International Monetary Fund

Dear Mr.____________:

Transmitted herewith for the consideration of the Congress is legislation which would implement the recommendations of the National Advisory Council on International Monetary and Financial Problems referring to "special borrowing arrangements of the International Monetary Fund." A copy of the report of the Council is attached.

The legislation takes the form of an amendment to the Bretton Woods Agreements Act and authorizes the United States to participate in loans to the International Monetary Fund in order to strengthen the international monetary system.

The International Monetary Fund has been a vital force for economic stability in the free world ever since it was formed in 1946. Its transactions have supported the currencies of free world nations which encountered balance of payments or other monetary difficulties, and it helped maintain confidence in the currencies of its members. The leadership of the United States in the establishment and support of the Fund has been a source of pride and satisfaction.

In my message of last February 6, I discussed the imbalance in our international payments and called for a series of related measures to correct it. A number of these measures have been adopted. But the problem is stubborn and complex and will require additional action over a number of years.

Meanwhile, we can strengthen the monetary system in general and the position of the United States in that system by augmenting the resources and flexibility of the International Monetary Fund to permit the Fund to be utilized more effectively in supporting a healthy and growing world economy.

To accomplish this purpose, intensive negotiations have gone forward, with the active participation of the Fund, among the major industrial nations of the free world. These negotiations culminated in the proposals described and recommended in the National Advisory Council's report calling for the addition of $6 billion to the resources of the Fund. This addition would strongly reinforce the international monetary system of the free world.

It would, in particular, greatly enhance the ability of the Fund to assist the United States in coping with its international payments problems. Today, the Fund has on hand only $1.6 billion of the currencies of other major industrial countries-exclusive of the United Kingdom, which has itself made a large drawing from the Fund--to meet a possible need for a drawing by the United States. The new arrangements would permit an additional $3 billion increase in available resources of these other major currencies, and would thus assure the Fund the assets needed to meet a request for a drawing by the United States should such a request ever be necessary. At a time when the confidence in the dollar is of utmost importance to the free world, the $6 billion addition to the Fund will be especially significant. It will greatly enhance our own financial resources and greatly reduce any possibility of a serious drain upon dollar balances. The very existence of the new standby credits will be an assurance of stability of major currencies.

The new borrowing arrangements would require amendment of the Bretton Woods Agreements Act by authorizing the United States to lend up to $2 billion to the Fund. The other nine participants in the arrangement would commit themselves to provide up to $4 billion. The commitment of nearly $2.5 billion by members of the European Common Market--Belgium, France, Germany, Italy, and the Netherlands--would represent an amount about equal to the present aggregate of their Fund quotas. By contrast the United States and the United Kingdom would provide amounts equal to only about half their present quotas. The United States would not be expected to lend to the Fund in the absence of a substantial improvement in its balance of payments position.

The new proposals would strengthen the position of the dollar as the world's major reserve currency. They would also provide new armament for the defense of the currencies of the free world and for reinforcing the entire international monetary system. I urge, therefore, that the Congress promptly consider this legislation. Participation by the United States in the proposed arrangements is in the national interest.

Sincerely,

JOHN F. KENNEDY