C. In reaching the above conclusions, Directors are invited to take into account the special situation of developing countries. The first members of the Fund were the countries represented at the United Nations Monetary and Financial Conference whose governments agreed to be members before 31 December 1945. In these circumstances, the Fund considers that there is no longer a balance of payments justifying discrimination on the part of members whose current receipts are largely denominated in externally convertible currencies. However, the Fund recognizes that, in cases where such discriminatory restrictions have been maintained for a long period of time, a reasonable period of time may be required to eliminate them completely. But this period should be short, and members should act as quickly as possible to eliminate discrimination against member countries, including those resulting from bilateralism. Membership shall be open to other countries at the times prescribed by the Governing Council and under the conditions laid down by the Governing Council. These Terms, including the Subscription Terms, are based on principles consistent with those that apply to other countries that are already members. III. Looking at the experience of the past decade as summarized in the Commission Staff Report, the IMF draws particular attention to the fact that complex multi-rate systems harm and harm the economies of the countries that maintain them and harm other countries. These complex systems are difficult to manage and involve frequent changes, discrimination, export subsidies, a considerable margin between rates and excessive differentiation between import classes. In recent years, the balance of payments and reserve positions of a number of IMF members have improved considerably, leading to significant and widespread progress in the external convertibility of many currencies. Most international transactions today are processed with convertible currencies, and many countries have come a long way with the lifting of payment restrictions.

As a result of these developments, it seems likely that a number of members of the Fund have reached a position or are approaching a position in which they can consider the possibility of formally assuming the obligations under Sections 2, 3 and 4 of Article VIII. Previous decisions of the Fund, such as decisions . B on practices in several currencies, bilateral agreements, discriminatory restrictions for balance of payments purposes and payment restrictions for security reasons, show the Fund`s position on these issues. This decision has been adopted as additional guidance to Members in order to achieve the objectives of the Fund set out in Article I of the Statute of the Convention. 1. Early and substantial steps should be taken to simplify complex multitax systems. The Fund will only approve these systems if the countries that maintain them make adequate progress in simplifying and permanently abolishing these systems or take measures or adopt programmes that could lead to such progress. The IMF concluded that these practices are due to widespread difficulties that currently exist in the international payments situation of many countries. The IMF`s examination of this issue has shown that so-called “retention rates and similar practices” cover a wide range of exchanges. Some practices in this area cannot be criticised from the point of view of the Fund`s policy. However, other practices in this category appear to have a detrimental effect on exchange rate stability and cause unnecessary damage to member countries.

They can also lead to retaliatory measures. The Fund`s interest in these matters clearly derives from the provisions of Article VIII, which sets out Members` general obligations with regard to the prevention of exchange restrictions, discriminatory monetary regimes and practices involving multiple currencies, and Article XIV, which deals with such exchange rate measures during the transitional period. 1. On 18 January 1974, the Committee on the Reform of the International Monetary System and Related Matters reviewed important recent developments and agreed that, in the present difficult circumstances, all Members should, in the management of their international payments, avoid adopting policies that would only exacerbate the problems of other Members. The Committee therefore stresses the importance of avoiding competitive devaluations and escalating restrictions on trade and payments; and stressed the importance of policies that maintain an appropriate level of economic activity and employment while minimizing inflation. It was also recognized that recent developments would lead to serious payment difficulties for many developing countries. The Committee agreed that closer international cooperation and consultations should take place in pursuit of those objectives. 3. Some Members have already taken steps to reduce their dependence on bilateral agreements, but many Members still use them. The IMF welcomes the reduction in the use of these arrangements and believes that the improved international payments situation makes it less necessary for members to rely on such arrangements. The IMF urges the full cooperation of all its members to reduce and eliminate dependence on bilateralism as soon as possible. In this context, the Fund recommends close cooperation between those who plan to make their currency convertible in the near future.

If this policy is not vigorously pursued by all countries, whether convertible or non-convertible, there is a serious risk that widespread restrictions, particularly of a discriminatory nature, will persist. In addition, the persistence of bilateralism may impede the achievement and maintenance of convertibility. This whole problem concerns not only countries that have bilateral agreements, but also other countries whose internal and external economic policies may affect the balance of payments of other members. The Fund shall prepare annual reports on the restrictions applicable under Section 2 of this Article. Any Member which maintains restrictions inconsistent with Sections 2, 3 or 4 of Article VIII shall consult annually with the Fund on their subsequent maintenance. The Fund may, if it considers that such a measure is necessary in exceptional circumstances, provide assurance to any Member that the conditions for the lifting of a particular restriction or for the general lifting of restrictions are favourable, which is inconsistent with the provisions of other Articles of this Convention. The member shall have a reasonable period of time to respond to such statements. If the Fund finds that the Member continues to maintain restrictions inconsistent with the objectives of the Fund, it shall be subject to Article XXVI, Section 2(a). .

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