The International Monetary Fund, representing 130 member countries, yesterday agree in principle to what could be a massiv increase in the funds it makes available to lend to each other.
At meeting of the IMF's policy-making Interim Committee, the agency agreed to increase its lending potential in two ways.
First, it adopted the suggestion of IMF Managing Director H. J. Witteveen that the IMF set up over the next few years a "temporary" and "supplementary arrangement" to assist members facing balance of payments deficits, largely due to high oil prices.
Witteveen told a press conference that the eventual goal for this fund is the equivalent of about $16.5 billion, and that some of the money might be asembled as early as this summer. But an initial target for the fund, in its first year, might be on the order of $9 to $9.5 billion.
Second, it was agreed that there would be "an adequate increase" in the regular quota contributions into the Fund by its memebrs. Members can borrow against their quotas, and earn voting rights in proportion. No percentage increase was expected to be set at this meeting, but indications are that it could be on the order of 50 per cent, which would ultimately expand the regular resources of the IMF by about $22 billion.
The idea behind the temporary lending facility is that it would fatten up depleted IMF resources prior to the time that the next quota increase might take effect.
Officials denied a New York Times story of Friday that had reported that Saudi Arabia, counted on for a major contribution, had established as a condition of its participation that loans be limited to less developed countries.
The communique specified that loans would be available to "all members." Equal treatment is required by the IMF charter. Beyond that, some of the first countries that may tap what has come to be called "the new Witteveen facility" are Mediterranean countries not usually classed as LDCs.
The IMF will borrow the money for its new fund at market-related interest rates, and charge the same high rates, although some subsidy may be arranged later for some low-income countries.
Willy De Clerq, Minister of Finance of Belgium, and Chairman of the interim Committee, hailed the agreement as providing "the political impetus" for arrangements assuring the stability of the international monetary system.
Witenveen, who has had preliminary talks with both oil-cartel and oil-consuming countries about contributions to the fund, said he could now begin to negotiate "terms of the credit lines"
The iMF executive board announced, meanwhile, agreement on principles and procedures which will govern the exercise of future IMF surveillance over exchange rates.
The principles require members to avoid manipulation of rates to gain an unfai competitive advantage, and say a member "should" intervene if necessary to counter "disorderly" market conditions. The procedures for surveillance are largely limited to consultation between the IMF and a member country.
If the IMF managing director feels a member's exchange rates violate the principles, he is to initiate a confidential iscussion with the country involved, and report the results to the Executive Board. But the matter cannot become an agenda item without the member country's request.