FOREIGN ECONOMIC AND COMMERCIAL POLICY


improving, the possibility of steps being taken toward the Fund's
objectives. In cases where the countries were prepared to make sub-
stantial moves, the Fund's resources might be made available to assist
in the progress.
   This proposal had been discussed by the Staff Committee. The
 U.S. Executive Director had indicated his view that we should welcome
 this suggestion of the Management of the Fund, and that the proposal
 did not mean modification of the Council's previous actions on the
 criteria governing the use of the Fund's resources.
   Mr. Southard observed that this might not be an appropriate time
 to talk about ways in which resources of theIFund might be used to
 encourage countries to move toward the objectives of the Fund, i.e.,
 to eliminate exchange restrictions and try to establish full converti-
 bility, at least on current account. The discussions in the Fund out-
 lined in his memorandum took place under circumstances of somewhat
 less anxiety than existed at the moment, but he had to assume that
 it might seem fit to the Managing Director and others to resume the
 discussion in the future. The reasons that impelled him to propose
 that he initially go along in the Fund-with the Gutt proposal were
 that it would be a means for the time being of putting to an end
 the rather fruitless and acrimonious discussion on the use of the
 Fund's resources in which the United States was usually made to
 bear the responsibility for holding back. He did not think we should
 give up the two basic positions that (1) drawings should be subject
 to scrutiny, to sensible criteria, and to challenge even at the last
 moment, and (2) that in some countries special questions of repay-
 ment would arise. Mr. Gutt had indicated that what he proposed
 would be without prejudiceto our views or those of the other side.
 He was saying that in the meantime, and with great caution, the
 Fund Staff would select those countries that might appear to be
 within reaching distance of the realization of the Furnd's objectives.
 The Fund would take the initiative in approaching those countries
 one by one to discuss,!their problems and what additional steps they
 might take. If it, appeared -they were prepared to take steps that would
 promise decisive progress toward the objectives of the Fund, but they
 feared they might be faced in the short-run with balance of payments
 pressure, the use of the Fund's resources might be held ýout to them
 as part of the whole package. There were, of course, pitfalls. The
Fund's Staff might be lacking in decision and firmness and allow
inadequate programs to be submitted to theBoard, and the Board
might have to take the position that these programs did not merit
the use of: the Fund's :resources. Even in such :cases the position of
the United States would be no worse than at the present time where
we are thought to be standing in the way of any except "blue. chip"


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