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International Monetary Fund (Substitution Account)

Volume 973: debated on Thursday 8 November 1979

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5.

asked the Chancellor of the Exchequer what is his policy towards the United States' proposal within the International Monetary Fund for a new substitution account or fund, and if he will make a statement.

If the practical problems involved in setting it up can be overcome, a substitution account of the kind proposed by the managing director of the IMF could in principle make a limited but useful contribution to the stabilisation of exchange rates. Detailed proposals have, however, yet to be formulated and considered.

Does that mean that Her Majesty's Government support this arrangement in principle? Does the Chancellor agree that we need an internationally acceptable currency reserve system that does not depend upon the vagaries of the economy of any one country?

As I told the conference of the IMF in Belgrade, provided that the practical problems involved in setting up a substitution account of this kind are solved it could, in principle, make a limited but useful contribution to the stabilisation of exchange rates.

The limit of the contribution depends entirely upon the size of the account. Does the Chancellor agree that if the Government were to press as many other Governments have done, for an account that starts at at least £10 billion SDR and rises rapidly to £50 billion, that would make quite a substantial contribution?

The answer to the question is that it depends upon the size of the account, although, as the right hon. Gentleman knows, there are many other factors to be considered.