Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

162. Memorandum From Secretary of the Treasury Blumenthal to President Carter¹

Washington, September 21, 1978

SUBJECT

• Probable Decisions at Forthcoming Meetings of IMF and IBRD

As you know, the IMF membership has been engaged for the last year or so in negotiations on an increase in quotas and an allocation of special drawing rights (SDR). We have indicated our agreement in principle to a quota increase and have taken a sympathetic view toward a modest SDR allocation, but have refrained from indicating figures we could accept, largely out of concern that a premature agreement on these questions might jeopardize Congressional action on the Witteveen Facility.²

Apart from the U.S., the Fund membership is now ready to settle these issues during the upcoming meetings.³ There is a need to reach agreement and assure that the IMF will be capable of playing its central role in managing the international monetary system. We are under considerable international pressure to conclude the agreement—and I think it would be highly desirable, and important for the dollar, for us to take a positive, constructive attitude. On the basis of intensive consultations with the Congress, I am persuaded that there is broad understanding and support for U.S. agreement to go ahead, and that an announcement of an agreement at the meetings will not cause serious problems for the Witteveen Facility.

In the absence of strong advice to the contrary from key Congressmen that remain to be contacted in the next couple of days, I intend to announce our agreement (probably on Sunday⁴ in the Interim Committee meeting where this is being negotiated) to an increase in quotas and an SDR allocation.

The quota increase will be in the range of 40–50 percent, with agreement most likely on 50 percent, implying an increase in the U.S. quota of about $5 billion. The authorization would probably be submitted to Congress sometime next year. However, assuming appropriations will be required as a result of the compromises we have had to accept on the Witteveen Facility, an appropriation would not be needed until FY 1981. The SDR allocation will probably total SDR 3–4 billion per year for a three-year period.⁵ No Congressional action on the SDR allocation is required.

Our agreement to these actions should be received quite positively by the press, the exchange markets, and our colleagues abroad.⁶

W. Michael Blumenthal⁷

1. Source: Carter Library, Records of the Office of the Staff Secretary, Presidential File, Box 102, 9/22/78 [2]. Confidential. Sent to Carter under cover of a September 22 memorandum from Owen, who noted that State, CEA, and OMB concurred in Blumenthal’s recommendations; both Carter and Brzezinski initialed Owen’s memorandum. (Ibid.)
2. Schultze argued strongly in favor of supporting IMF quota increases and new SDR allocations in a September 14 memorandum to Blumenthal. (Carter Library, Staff Office Files, Council of Economic Advisers, Charles L. Schultze Subject Files, Box 20, Department of Treasury: Blumenthal)
3. Blumenthal is referring to the joint IMF–World Bank meeting held in Washington September 25–28.
4. September 24.
5. In his September 22 cover memorandum (see footnote 1 above), Owen suggested that the new 3-year annual SDR allocation would be “most likely 4 billion.”
6. In his September 22 cover memorandum (see footnote 1 above), Owen commented: “The amounts that Mike has in mind are reasonable in terms of world liquidity requirements: 50% quota increases were recommended by the IMF management; a 4 billion SDR allocation is a good compromise between the management’s proposal for 4–6 billion and the German desire to settle on lower amounts.” On September 24, the Interim Committee agreed to a 50 percent IMF quota increase and a 3-year annual issue of 4 billion SDR. (Hobart Rowen, “Finance Chiefs Agree to Boost IMF, World Bank Resources,” The Washington Post, September 25, 1978, p. D14)
7. Blumenthal signed “Mike” above this typed signature.