Canada has been an active member of the International Monetary Fund and of the International Bank for Reconstruction and Development ever since they were set up in 1946. Canada's quota in the Fund was established at $300million and Canada's subscription to the Bank at $325million; in both cases a certain amount was payable in cash (25 per cent and 2 per cent respectively) and the remainder was made up of contingent obligations of different sorts.

2. On July 25, 1958 the Prime Minister, speaking in Parliament, expressed strong support for an increase in the resources of the International Fund and Bank.¹²⁶ I believe that consideration must be given to an increase in quotas of the International Monetary Fund of 50 per cent ... which would substantially increase the liquid assets underpinning world trade ... All the uncommitted countries of the world today look to the international Bank for help in their development programmes. Action to double the guaranteed capital subscriptions would shore these countries up economically and give them new hope ...

3. On September 7, in its instructions to the Canadian Delegation to the Commonwealth Trade and Economic Conference,¹²⁷ Cabinet approved Canadian support, at both the Montreal and NewDelhi Conferences, for a general increase of 50 to 100% in the quotas of the Fund and up to 100% in subscriptions to the Bank.

4. The Commonwealth Conference, in its Report, supported the proposal for a substantial enlargement of the resources of the Fund and Bank.

5. At the Annual Meetings of the two institutions in New Delhi resolutions were passed instructing the Executive Directors to make specific recommendations for consideration by Governments.¹²⁸ As Canadian representative, Igave strong support to the proposal for increases. It now seems virtually certain that the Executive Directors will submit their reports before the end of this year. They are expected to propose a general increase of 50 per cent in Fund quotas and 100 per cent in Bank subscriptions.

6. Canada is clearly committed to proportionate increases in line with the general movements. But the question arises whether it would not be in our interest to go farther. A number of other countries, including Germany and Japan where (as in Canada) the recent economic growth has been exceptionally rapid, are requesting increases beyond the general level.

7. On the negative side it should be pointed out that any increase in our quota in the Fund will involve us (a) in an increased transfer of gold from our own Exchange Fund into the International Fund and (b) in an increased obligation to provide Canadian dollars to the Fund if these are requested by other countries. It should be added, however, that under the Fund rules we can get our gold back if we need it and, as for providing Canadian dollars, it is extremely unlikely that these will ever be requested in amounts larger than we are already committed to provide. Turning to our subscription to the Bank, the increase may be considered in two parts; first, our share of the general increase and, second, the amount by which we might go beyond the general increase. In respect of the first part, it is quite clear that our additional subscription would be solely in the form of a guarantee; this guarantee could only be called upon if the Bank made extremely heavy losses, and so far it has made none. The second part would be very largely at least four-fifths in the same form, and might be entirely in that form. However, judging from current discussions, it is possible that we might be expected to pay 2 per cent in gold; and a further 18 per cent might be payable in Canadian dollars which, however, could only be used after Canadian concurrence and could be linked to exports of Canadian capital goods.

8. On the positive side, any increase in our quota in the Fund increases our right to draw on its resources in the event that we need to do so. Any increase in our capital subscription to the Bank increases its borrowing powers, and hence its ability to support economic expansion in underdeveloped areas.

9. A further reason for Canada to go beyond the general level of increases lies in our interest in maintaining our now well-established position of prestige and influence (including our voting rights) in these two important institutions.

10. I would propose increases in our contributions which would keep us slightly ahead of Japan, and slightly behind India. The latter country is particularly anxious to continue to be one of the big five , which would, on the basis of currently proposed adjustments, comprise U.S., U.K., France, Germany and India. These five countries would be entitled to appoint Executive Directors without going through the process of elections. On the other hand our increases should be large enough to ensure that we would have no difficulty at any time in electing a Canadian. It is not possible at this stage of the negotiations to name absolutely precise figures, but we know enough to make a close estimate.

11. Accordingly I recommend¹²⁹ (subject to concurrence by the Prime Minister which Iam requesting separately):
    
    

    1. that, in the current negotiations in Washington, Canada should request a quota of about $550 million in the Fund, compared with the present quota of $300million; of the increase, about $62.5million would be paid in gold from the Exchange Fund and the balance in non-interest bearing notes;

    2. that Canada should, in connection with that request, offer to increase its subscription to the Bank to about $750million from the present $325million, this subscription to be largely and, if possible, entirely in the form of a guarantee; however, if necessary to obtain general agreement, an amount not exceeding $2million dollars may be made payable in gold from the Exchange Fund and a further amount not exceeding $18million may be made payable in Canadian dollars subject to such terms and conditions as the Canadian Government may decide; and

    3. that final decisions on this matter be taken after the reports of the Executive Directors of the two institutions have been received.

12. Enlargement of our quota in the Fund and of our subscription to the Bank would require the approval of Parliament. If arrangements proceed along the lines set out in this memorandum I shall ask for authority to introduce the appropriate legislation. Neither of the proposed increases would appear as a Budgetary item; both would appear under the heading Loans and Investments. Further, while these increases would be recorded in the Public Accounts, in the Statement of Assets and Liabilities, they would not be included in The Public Debt.

DONALD M.FLEMING

¹²⁶ Voir Canada, Chambre des Communes, Débats, VolumeIII, 1958, pp.2847 à 2853.
See Canada, House of Commons, Debates, Volume III, 1958, pp.2702-2708. He spoke, in part, as follows:

¹²⁷ Voir/See Document 370.

¹²⁸ Pour un compte rendu des treizièmes réunions annuelles du Fonds et de la Banque, voir ministère des Affaires extérieures, Le Canada et les Nations Unies, 1958 (Ottawa, 1959), pp.67 à 72.
For an account of the thirteenth annual meetings of the Fund and the Bank, see Department of External Affairs, Canada and the United Nations, 1958 (Ottawa, 1959), pp.66-72.

¹²⁹ Approuvé par le Cabinet le 9 décembre 1958./Approved by Cabinet on December 9, 1958.