Letter to the President of the Senate and to the Speaker of the House on the International Monetary Fund.
Dear Mr. President: (Dear Mr. Speaker:)
The International Monetary Fund has played a key role in the flourishing economic growth experienced by the Free World in the last two decades. An expansion of the Fund's resources is now needed if it is to continue to contribute effectively to Free World growth in the future. The United States has given its firm support to the Fund since its creation in the Bretton Woods Agreements of 1945. This support must continue.
I recommend to the Congress that the quota of the United States in the International Monetary Fund be increased by twenty-five percent along with the similar or greater increases proposed for other members. The increases proposed for all members will raise Fund quotas by about $5 billion and bring total quotas to $21 billion. This expansion is vital to the United States. It will:
--promote the orderly and stable growth of Free World trade and payments in which we so importantly participate;
--maintain the strength and central position of the Fund in the evolution of the international monetary system;
--help finance the temporary swings in balance of payments associated with the growing volume of international transactions;
--support the expansion of bilateral credit facilities which have contributed to the development of the international monetary system; and
--provide to the Fund other major currencies to meet drawings that have mainly been financed by dollars in the past, and thus strengthen the present payments system.
Demands on the Fund's resources have steadily risen as the volume of world trade and financial transactions has grown. In the past five years drawings on the Fund have averaged over $1 billion per year; during the period 1955-1959, the annual average was $440 million. This increased use of the Fund reflects both the great expansion of current international transactions since 1959 and the increasingly large international movement of capital since the return to convertibility of the major European currencies. Increased use of the Fund has been especially marked among the large industrial countries. Since 1962 Canada, Italy, Japan, the United Kingdom and the United States have either drawn on Fund resources or entered into standby arrangements or both.
A significant change in the holdings of the Fund has also occurred. For many years the U.S. dollar was the only currency extensively drawn by other member nations. But because of our balance of payments deficits, the Fund has increasingly provided other currencies to drawing members. As a result its holdings of major currencies other than dollars and sterling have declined by over $1 billion since 1959. The proposed quota increase will substantially enlarge the Fund's holdings of these currencies.
Moreover, the Fund's credit facilities have been directly useful to the United States. Prior to 1958, the United States attained a large creditor position because of the extensive lending of dollars by the Fund. From 1958 to 1963 reversal of our earlier Fund creditor position financed over $1 billion of our payments deficit; and since 1963, we have made net drawings of $260 million of the Fund's resources for this same purpose.
I am transmitting legislation which would authorize the United States Governor of the Fund to agree to an increase of $1,035 million in the United States quota, bringing our total quota to $5, 160 million. Three-fourths of the increase, or $776 million, will be obligated in dollars but will be expended only as needed by the Fund. The remaining $259 million will be payable in gold. In return for this gold payment, the United States will receive a substantially equivalent reserve asset in the form of a virtually automatic drawing right on the Fund. Arrangements have been made both to minimize the amount of gold sales by the United States to other Fund members for their gold subscription payments, and to mitigate the impact of any purchases that may occur.
The National Advisory Council on International Monetary and Financial Problems has prepared a report which is being sent separately to the Congress. The report will provide background information for the use of the Congress, and strongly endorses the proposed quota increase.
The increased Fund quotas will contribute importantly to the economic health of the Free World. The increase is dearly in the interest of the United States. I urge that Congress give prompt and favorable consideration to this legislation.
LYNDON B. JOHNSON
Note: This is the text of identical letters addressed to the Honorable Hubert H. Humphrey, President of the Senate, and to the Honorable John W. McCormack, Speaker of the House of Representatives.
The bill (H.R. 6497) "To amend the Bretton Woods Agreements Act to authorize an increase in the International Monetary Fund quota of the United States" was approved by the President on June 2, 1965 (Public Law 89-31; 79 Stat. 119).
Lyndon B. Johnson, Letter to the President of the Senate and to the Speaker of the House on the International Monetary Fund. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/242192