Issues in International Exchange and Payments Systems

Peter Quirk

• Publisher: INTERNATIONAL MONETARY FUND
• Year: 1995
• eBook ISBN: 9781557754806

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¹ See Developments in International Exchange and Trade Systems, World Economic and Financial Surveys (Washington: IMF, September 1989), and Developments in Exchange and Payments Systems, World Economic and Financial Surveys (Washington: IMF, June 1992).

² A number of staff papers prepared for the Executive Board in recent years have addressed policies for specific forms of exchange controls, including multiple exchange rates, bilateral payments arrangements and countertrade, and external payments arrears. General policies for exchange controls have been addressed in the biennial exchange system surveys, such as the present one, and previous to these surveys, in Part 1 of the AREAER. References to these policy issues may also be found in IMF, Selected Decisions and Selected Documents of the International Monetary Fund (Washington: IMF, 1994) (see various decisions relating to Articles VIII and XIV).

³ Exchange controls affecting exports or export receipts do not fall within the meaning of current account convertibility under the IMF’s Article VIII. The major types of exchange control governing export transactions are repatriation and surrender requirements on foreign exchange receipts. Although these controls fall outside the jurisdiction of the IMF, unless multiple currency practices are involved, they are subject to careful surveillance by the IMF as a form of capital control (see Section III), and because a system of exchange controls on current international payments and transfers relies on centralization of foreign exchange receipts. Fiscal incentives for exports, such as exemption from taxes and special credit facilities, were identified to be in use by some 31 members at the end of 1993, and some 56 members were imposing export taxes or other fees for revenue purposes. Nearly three-fourths of IMF members maintained controls on exports, either through licensing requirements with or without explicit quotas, or through specific prior authorization requirements for exports of certain products. The controls in most of these countries, both industrial and developing, were administered only for specific products or products involved in bilateral trade arrangements.

⁴ Algeria, Angola, Iraq, Mongolia, Myanmar, Suriname, Syrian Arab Republic, and Republic of Yemen.

⁵ Negative list regimes are much simpler to administer and tend to be more liberal, as the list of restricted or prohibited imports can be kept short and discretionary and administrative decisions regarding license issuance need not be made. Negative import regimes are commonly applied by members that are restricting or prohibiting imports for reasons other than to affect the balance of payments, for example, to protect domestic producers or for phytosanitary purposes.

⁶ For a general discussion of multiple exchange rates, see Section IV.

⁷ Restrictions on debt payments associated with external payments arrears and debt-restructuring arrangements are discussed in Section II.

⁸ Members of the Central Bank of West African States (BCEAO) and the Bank of Central African States (BEAC) suspended the repurchase of CFA franc bank notes circulating outside the territories of the CFA franc zone.

⁹ Data for external payments arrears discussed in this section include arrears caused by exchange restrictions on current international payments or transfers, as well as arrears on financial obligations of which the obligor is the government (defaults), which are not subject to the IMF’s jurisdiction.

¹⁰ This is to give effect to Executive Board Decision No. 1034 (60/27), adopted June 1, 1960, which states that “it would be desirable that, as far as possible [members] eliminate measures that would require the approval of the Fund, …” (Selected Decisions (June 1994)).

¹¹ The new Article VIII members and their dates of acceptance are: The Gambia, Morocco, and Tunisia (January 1993); Federated States of Micronesia (June 1993); Lebanon (July 1993); Israel and Mauritius (September 1993); Barbados (November 1993); Trinidad and Tobago (December 1993); Grenada (January 1994); Ghana (February 1994); Sri Lanka (March 1994); Bangladesh and Uganda (April 1994); Lithuania and Nepal (May 1994); Kenya and Latvia (June 1994); Pakistan (July 1994); Estonia, India, and Paraguay (August 1994); Western Samoa (October 1994); and Malta (November 1994). Four members accepted Article VIII obligations in 1992, and three of them did not have any exchange restrictions when they joined the IMF: Marshall Islands (May 1992); Switzerland (May 1992); and San Marino (September 1992). See Table 1 for a listing of remaining Article XIV members.

¹² Amortization of loans and depreciation of direct investment are regarded as a capital transaction in the balance of payments. All remittances representing a transfer of income between residents and nonresidents are regarded as current transactions in the balance of payments.

¹³ Executive Board Decision No. 1034–(60/27), June 1, 1960, in Selected Decisions (June 1994).

¹⁴ Executive Board Decision No. 144–(52/51), August 14, 1952 in Selected Decisions (June 1994), provides that restrictions reported to the IMF pursuant to this Decision are approved for purposes of Article VIII, Section 2, unless the IMF informs the member within 30 days of receiving the notice that it is not satisfied that such restrictions are proposed solely to preserve national or international security. In recent years, many members have notified the IMF of exchange restrictions imposed against Haiti, Iraq, the Libyan Arab Jamahiriya, and the Federal Republic of Yugoslavia (Serbia and Montenegro) under this Decision.

¹⁵ In a few instances, acceptance of Article VIII obligations has been encouraged in the presence of remaining Article VIII restrictions—provided that these are relatively minor and the countries have a clear-cut timetable for removing them (for example, Bangladesh and Mauritius).

¹⁶ As of April 1994, 98 developing countries were members of GATT; in addition, 14 other developing countries observed the regulations of GATT, although they did not subscribe to GATT membership. (These numbers exclude Aruba, the Netherlands Antilles, and Hong Kong, for which the Articles of the IMF have been accepted by the Kingdom of the Netherlands and the United Kingdom, respectively.) Of those developing countries that are members of GATT, all except Brunei and Cuba are also members of the IMF. On the other hand, 59 developing countries that are members of the IMF are not members of GATT, while 13 of these member countries of the IMF apply GATT regulations in practice. Of those IMF members that have accepted the obligations of Article VIII, 21 do not belong to GATT but 7 of them apply GATT regulations.

¹⁷ During the 1980s, only Finland, France, Norway, and Spain felt it necessary to suspend temporarily the freedom of capital movements under the codes of liberalization of capital movements of the Organization for Economic Cooperation and Development (OECD). For a detailed discussion see Liberalization of Capital Movements and Financial Services (Paris: OECD, 1990).

¹⁸ The IMF and the World Bank, mainly through the work of the Development Committee, have emphasized this aspect in recent documents. See Determinants and Systemic Consequences of International Capital Flows, IMF Occasional Paper No. 77 (Washington: IMF, 1991); Development Committee, Development Issues: Presentations to the 46th Meeting of the Development Committee, Development Committee Series No. 31 (Washington: World Bank, 1993); “Development Committee Communique” and “Group of 24 Communiqué,” IMF Survey, May 17, 1993; and G.P. Pfeffermann and A. Madarassy, Trends in Private Investment in Developing Countries, 1993: Statistics for 1970–91, IFC Discussion Paper No. 16 (Washington: World Bank, December 1992).

¹⁹ By the end of MIGA’s first full financial year of operations, 69 preliminary applications for guarantee covering potential direct investments in 24 member developing countries and a broad range of sectors were registered with MIGA. In 1992–93, MIGA facilitated almost $2 billion in direct investment flows. Given the long-term nature of most direct investment, MIGA typically provides guarantees for 15 years.

²⁰ The prototype treaty reflects six principles of a liberal investment regime, including free transfers of foreign exchange for all capital and all returns on an investment; full convertibility is to apply ...

Table of contents

• Cover Page
• Copyright Page
• Content Page
• Preface
• I. Overview
• II. Progress Toward Current Account Convertibility
• III. Capital Account Convertibility
• IV. Evolving Roles of Exchange Rate Regimes
• V. Bilateralism and Regionalism in Cross-Border Payments
• VI. Implications for the IMF’s Technical Assistance
• VII. Issues That Arise in the Context of Exchange System Developments
• Box
• Footnotes