Chapter

Developments in the International Exchange Rate and Restrictive Systems

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
January 1988
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I. Introduction

The period covered by this Report is 1987 and, for major developments, the first quarter of 1988. The International Monetary Fund’s Articles of Agreement call for member countries to provide the Fund with a comprehensive description of their exchange rate arrangements and exchange controls and changes in these as they occur. The Report focuses on exchange arrangements and exchange restrictions. However, measures modifying members’ restrictions on trade are also monitored by the Fund in the context of its function of surveillance over exchange rate policies of members. The Report also includes other external economic policy measures and intergovernmental arrangements that have direct balance of payments implications. As in previous Reports, in the descriptions of members’ systems, questions of definition and jurisdiction have not been raised; the description in the Report of a restrictive practice by a member does not mean that it is or is not being maintained consistently with the Fund’s Articles, or that, if subject to Article VIII, it has or has not been approved by the Fund.

Global Environment

In 1987 the global economy continued to expand for the fifth consecutive year since the recession in 1980-82. World economic output rose by an estimated 3 percent in 1987, only marginally less than in 1986, and the growth in the volume of world trade accelerated somewhat to almost 5 percent. During the five years of economic expansion since 1982, the rate of growth of world trade volume has been generally higher than the rate of world output growth, despite continuing protectionist pressures, reflecting a further increase of economic interdependence in real as well as financial sectors of Fund members (Chart 1).

Chart 1Growth of World Trade and Output, 1971–871

(Percent change in volume)

Source: World Economic Outlook.

1 Trade (exports plus imports) and output (gross national product) are in volume terms. Prior to 1978, the People’s Republic of China is excluded.

The slightly lower rate of world output growth in 1987 was entirely on account of a slowdown in developing countries and in Eastern European countries, whereas output growth in industrial countries actually accelerated to 3.1 percent from 2.7 percent in 1986. Output growth in non-fuel exporting developing countries slowed to 4.5 percent from nearly 6 percent in 1986, a development which is largely explained by a drought-related temporary slowing of economic activity in India and a marked deceleration in Brazil. Excluding developments in these two countries, output in the group of non-fuel exporting developing countries grew by about 5.5 percent, slightly less than in the preceding year.

Inflation, measured on the basis of consumer prices, rose modestly in industrial countries in 1987 under the impact of a tightening of world markets for most primary commodities in the second half of the year and the partial recovery of oil prices. However, in developing countries inflation accelerated by more than 10 percentage points, reflecting more accommodating monetary policies in some countries.

Against this background of continuing economic growth and divergent inflation developments, further important changes in the global trade pattern occurred in 1987. On the one hand, the rate of import volume growth of industrial countries slowed down significantly to 5.7 percent from 9 percent in 1986, largely on account of a marked deceleration in import volume growth in the United States. On the other hand, the volume of imports of developing countries grew by nearly 3 percent in 1987 after a decline of 4.5 percent in 1986. However, the volume of imports of fuel exporting developing countries continued to contract markedly by 12 percent, implying a near-halving of the level of imports since 1981, while the import volume growth of non-fuel exporting developing countries expanded by slightly more than 7 percent following a small increase by 1 percent in 1986.

On the export side, the change in trade patterns was similarly striking. Responding in large measure to the sharp depreciation of the U.S. dollar over the past three years, U.S. exports increased by over 20 percent in volume during 1986-87, whereas the growth of Japan’s export volume decelerated to remain virtually unchanged during the same period, and the export volume growth of European industrial countries also decelerated markedly. Market shares of non-fuel exporting developing countries rose significantly in 1987 as a result of a 10 percent increase in their export volume, partly reflecting further improvements in the export performance of newly industrialized Asian economies, but also reflecting higher export growth of other developing countries in Asia, Europe, and the Western Hemisphere. In contrast, there was a decline in the volume of exports from developing countries in the Middle East and Africa.

The combined terms of trade of fuel and non-fuel exporting developing countries improved in 1987 by nearly 3.5 percent, largely on account of an improvement of nearly 12 percent in the terms of trade of fuel exporting developing countries. However, this improvement only slightly reversed the dramatic deterioration that developing countries experienced in 1986, when their combined terms of trade deteriorated by almost 20 percent as a result of the sharp decline in oil prices and weakening world market prices of other major primary commodities. As the improvement in 1987 reflected in the first instance the partial recovery of oil prices, fuel exporting developing countries experienced an improvement of some 11.5 percent in their terms of trade in 1987, following a deterioration of nearly 50 percent in 1986. Non-oil commodity prices began to recover in the second half of 1987, after prices, weighted according to the trade pattern of developing countries, hit the bottom of a three-year decline in mid-1987. Nevertheless, for the year as a whole, the terms of trade of non-fuel exporting developing countries improved by less than 1 percent in 1987 after a deterioration of about 3 percent in 1986.

The process of reducing external imbalances in developing countries, which had begun in 1983 and which was reversed in 1986 as a result of the deterioration of the external current account position of fuel exporting developing countries, was resumed in 1987. The continuing decline in imports resulting from strong adjustments in fuel exporting developing countries brought about a significant reduction in their combined current account deficit. The aggregate current account position of non-fuel exporting developing countries also strengthened; as a group, these countries recorded a surplus for the first time in at least 20 years. However, this surplus was largely a result of further improvements in the export performance of developing countries in the Asian region. The combined current account deficit of developing countries that have experienced debt-servicing problems in recent years—that is, countries having incurred external payments arrears during 1986 or rescheduled debt service obligations during 1984-86 (all outside of the Asian region)—declined to US$15 billion in 1987. This compares to a peak of US$73 billion in 1981, from which the deficit had declined gradually to US$7 billion in 1985 before rising again to US$22 billion in 1986. The aggregated current account deficits of developing countries in Africa and the Western Hemisphere were also reduced in 1987, but their levels remained high compared with 1985.

Within the group of industrial countries, the adjustments that have occurred in the pattern of trade flows have not been sufficient to correct the large current account imbalances that emerged during the 1980s. The deficit of the United States widened by a further US$20 billion in 1987, to US$161 billion, whereas the surplus of the Federal Republic of Germany increased by US$6 billion to US$44 billion, and Japan’s surplus remained approximately stable at around US$87 billion. However, these developments in nominal balances in part reflected the so-called J-curve effects of the depreciation of the U.S. dollar against the currencies of other industrial countries.

The declining trend of interest rates observed since 1984 came to a halt in 1987. Fears of a resurgence of inflationary pressures, as well as efforts to support the dollar, led to a gradual firming of interest rates in the United States during much of 1987. As a result, interest differentials widened significantly in favor of dollar-denominated assets. The sharp decline in stock market prices in October 1987, which, it was initially feared, might induce a significant decline in consumer demand, appears to have affected consumers only moderately in the short run. However, in the aftermath of the stock market decline, interest rates declined following an injection of liquidity by central banks; the decline probably also reflected expectations of weaker economic growth and a moderation of inflation fears.

The total debt of developing countries is estimated to have risen in 1987 by some 8.5 percent in terms of the U.S. dollar; about 5 percentage points of this increase is estimated to have reflected the depreciation of the U.S. dollar during the year. Nevertheless, the ratio of developing countries’ external outstanding debt to receipts from exports of goods and services is estimated to have fallen significantly in 1987, for the first time since 1980, as the value of receipts from exports of goods and services rose by about 20 percent in U.S. dollar terms. Debt service payments effected in 1987, as a percentage of exports of goods and services, declined to 19 percent from a peak of 22 percent in 1986 for the group of developing countries as a whole, partly reflecting a significant increase in debt deferment granted under restructuring arrangements.

Developments in Exchange Restrictions and Trade Policies

As in preceding years, the continuation of large trade imbalances and persistently high levels of unemployment in some European countries was at the root of strong protectionist pressures for new trade restrictions in the industrial countries. The vulnerability of governments to these pressures is reflected in a further tightening of quantitative restrictions in industrial countries, often in the form of voluntary export restraint or similar arrangements. Industrial countries also introduced further countervailing and antidumping duties.

Following the launching, in September 1986, of a new round of multilateral trade negotiations under the auspices of the General Agreement on Tariffs and Trade (GATT), contracting parties entered into the “initial phase” of the negotiations. The participants devoted the initial phase, which was completed by end-1987, primarily to the reaching of agreements on negotiating techniques and modalities as well as the clarification of initial positions. Considerable concern was expressed at the final meeting of the Group of Negotiations on Goods in December 1987 that the standstill and rollback commitment is not being fully observed. In 1987 no country informed the Surveillance Body that it intended to roll back measures that were inconsistent with GATT regulations. In fact, numerous allegations were made to the Body of measures being taken, mainly by industrial countries, that breached the standstill commitment.

In 1987 the number of significant measures taken by industrial countries to increase reliance on quantitative trade restrictions greatly outweighed the number of liberalizing measures. Despite the commencement of the new multilateral initiatives within the GATT, these measures—both restrictive and liberalizing—were increasingly bilateral or regional in character. The number of bilateral voluntary export restraint arrangements increased sharply, mainly protecting the European Communities (EC) market or the market of one of its members, the U.S. market, and the Canadian market. The largest number of arrangements outside the Multifiber Arrangement (MFA) pertained to steel products. In the automobile and transport equipment sector, Japan extended by one more year the voluntary restraint system applied since 1981 for car exports to the United States and agreed to limit the increase of car sales to the EC in 1987 at 10 percent of the 1986 level; the voluntary export restraint on car sales to Canada lapsed in March 1987 and was not extended.

Following the decision by the GATT Textiles Committee in August 1986 to extend the MFA for five years to July 31, 1991, a large number of bilateral arrangements were signed by industrial countries with other participating countries in 1987. In addition, a number of voluntary export restraint arrangements were signed by major industrial countries with countries not participating in the MFA to limit competition in their markets for textile products.

With respect to tariff measures, Australia continued the process of adjusting its tariff structure with the announcement of a seven-year plan to restructure the textile, clothing, and footwear industries, and to eliminate tariff quotas by 1996.

Regarding bilateral trade policies within the group of industrial countries, the most important development was the announcement, in October 1987, of successful negotiations for a free trade area between Canada and the United States. The United States also agreed to a bilateral framework for trade and investment consultations with Mexico.

Several trade conflicts involving agricultural products were avoided or temporarily adjourned. In November 1987 the EC delayed for 18 months a ban on beef treated with growth hormones, thus averting a conflict with the United States. In February 1988 a GATT Panel Report that recommended that Japan eliminate import curbs on ten categories of food products was adopted.

In developing countries the trend toward import liberalization observed in 1986 continued in 1987. In the group of fuel exporting developing countries, Indonesia, Iraq, and Tunisia undertook measures to remove quantitative import restrictions, and no country in this group tightened its system of quantitative import controls. In the group of non-fuel exporting developing countries, most changes in quantitative import controls were also in the direction of liberalization, and in some cases encompassed far-reaching reforms. Among countries floating their exchange rates, Maldives removed the foreign exchange financing requirement through the banking system for the issuance of import licenses, and Ghana eliminated the restrictions on import financing through the foreign exchange auction market, with a few specified exceptions. The range of imports subject to administrative licensing was narrowed in several developing countries (Guinea-Bissau, Haiti, Honduras, Korea, the Philippines, Sri Lanka, Uganda), and a number of other countries admitted imports of certain items previously prohibited or restricted (Argentina, Bangladesh, Ecuador, India, Niger, the People’s Republic of China, Thailand).

Only a few developing countries were reported to have intensified quantitative import restrictions on a broad range of products, although a number of countries imposed quantitative restrictions on a product-by-product basis. Moreover, the number of instances in which the system of quantitative import restrictions was liberalized in the developing countries by far exceeded, as in 1986, the number of restrictive changes in this group of countries.

The process of reducing import tariffs under the Tokyo round agreements continued in some industrial countries during 1987, and some important changes were introduced by industrial countries in the functioning of the Generalized System of Preferences (GSP). Significant reductions in import duties occurred in Australia, Japan, New Zealand, and Switzerland. Switzerland implemented the last stage of the reduction of import duty rates pledged under the Tokyo round of negotiations, and in parallel, reduced the preferential rates for developing countries on items that do not receive duty-free treatment. The United States restored Poland’s most-favored-nation status in February 1987, thus terminating sanctions imposed earlier. A major revision in its GSP was undertaken by the EC with respect to industrial products, in which the number of sensitive products was reduced, 24 individual quotas were eliminated, and some preferential limits were increased. At the same time, preferences were removed through the implementation of a differentiating strategy in 29 cases on the basis of findings that the suppliers had become sufficiently competitive. Japan also increased the selectivity of preferences by reducing individual country ceilings, and extended the system of preferences to allow for more imports. The United States modified its system of preferences to improve benefits for less advanced developing countries and announced the graduation of some of the most advanced developing countries from the program (Bahrain, Bermuda, Nauru, and Brunei, with effect from July 1988; and Hong Kong, Korea, Singapore, and Taiwan Province of China, with effect from January 1989).

The sharp upward trend in the utilization of antidumping measures that had been. observed in industrial countries in previous years did not continue in 1987. Nevertheless, further antidumping duties were introduced by the EC on imports of outboard motors, by Canada on various products, and by the United States on several steel products from a number of countries and on certain other products. A long-standing dispute between the United States and the EC on pasta export subsidies was finally settled in August 1987. An important development in the field of antidumping measures was the extension, under specified conditions, of EC antidumping regulations to manufacturers within the EC that are closely tied to companies outside the EC and are already subject to antidumping levies.

In the area of quantitative export restrictions, four industrial countries (Australia, Japan, New Zealand, Norway, and Sweden) extended existing or introduced new restrictions in 1987, whereas no liberalizing changes were reported for industrial countries. In the group of developing countries, four countries (Ethiopia, India, Israel, and Korea) introduced new quantitative export restrictions, whereas only two countries (Argentina and Sri Lanka) eliminated certain quantitative restrictions on exports.

Fiscal incentives for exports were removed in 1987 in one industrial country (New Zealand) and two developing countries (Greece and Uruguay), whereas three developing countries (Argentina, Bolivia, and Jamaica) introduced new incentives, and three other developing countries (Chile, Côte d’Ivoire, and Turkey) increased the scope of existing export subsidies. Taxes on exports were completely eliminated in Haiti, and for all but one product in Guinea-Bissau; significant reductions in export duties occurred in Argentina, Colombia, Indonesia, Sri Lanka, and Zaïre. New levies on certain exports were introduced in Dominica and export levies were raised in Sierra Leone. A number of developing countries abolished or significantly reduced surrender requirements for export receipts in 1987, mostly in the framework of continuing reforms of the exchange system. Surrender requirements for export receipts were intensified in three developing countries.

The trend toward liberalization of current invisible payments and unrequited transfers that had emerged in 1986 continued in 1987, as a number of developing countries increased foreign exchange allowances for travel abroad, and several developing countries eased regulations on other invisible transactions. Only a few developing countries tightened restrictions on current invisibles, primarily with the intention of controlling capital flight. In the group of industrial countries, where relatively few restrictions on current invisibles and unrequited transfers are being maintained, Italy raised the limit on sales of foreign exchange to residents for travel abroad and relaxed regulations governing the import and export of foreign and domestic currency notes and holdings of foreign currency.

During 1987 there was a considerable reduction in the total amount of outstanding external payments arrears of Fund members. After a significant increase by some SDR 8 billion in 1986, external payments arrears are estimated to have declined by about SDR 7 million in 1987. The number of Fund members having external payments arrears declined in 1987, as five members (Afghanistan, Cape Verde, Gabon, Jamaica, and Western Samoa) eliminated existing arrears. Two members (Burma and Panama) that did not have arrears previously incurred them during 1987, and arrears re-emerged in one other member country (Ecuador). Reschedulings of payments arrears were an important cause for the decline of the total amount of arrears in 1987, and the rescheduling of arrears due by three countries (Brazil, Egypt, and Poland) accounted for over 90 percent of total arrears rescheduled in 1987. Overall, 19 Fund members with external payments arrears concluded multilateral debt renegotiations with official and commercial creditors in 1987. External debt obligations covered by restructuring agreements signed by Fund members in 1987 are estimated at US$117 billion, compared with US$76 billion covered by arrangements signed in 1986.

The trend toward reduced reliance on multiple currency practices observed since 1985 continued in 1987, as 16 members (Argentina, Bangladesh, Brazil, the Dominican Republic, Ghana, Greece, Guinea, Guyana, the Lao People’s Democratic Republic, Nigeria, Peru, Somalia, Sudan, Trinidad and Tobago, Zaïre, and Zambia) either eliminated or simplified existing multiple currency practices, including cases where the coverage of transactions by market-determined or market-related exchange rates was extended. Two members (Ecuador and Grenada) reintroduced multiple currency practices eliminated in 1986, and five members (Bolivia, Ecuador, Guinea, Nicaragua, and Romania) introduced measures that rendered existing multiple currency practices more complex.

During 1987 the number of bilateral payments arrangements of Fund members remained unchanged, as no member concluded or terminated such arrangements during the year. Total bilateral payments arrangements between Fund members amounted to 69, and arrangements between Fund members and non-Fund members amounted to 72.

The liberalization of exchange controls on capital transactions noted in recent Annual Reports continued in 1987, primarily in industrial countries, reflecting not only a greater reliance on exchange rate and interest rate policies as a means of influencing international capital flows, but also reduced confidence in the effectiveness of exchange controls. Liberalizing changes affected, inter alia, regulations governing foreign currency working balances, long-term financial investments, personal transfers, and foreign borrowing. In the group of developing countries, a number of countries continued their liberalization efforts, whereas regulations were tightened in several other countries. However, measured on the basis of the reported number of changes affecting capital transactions, liberalizing measures by far outweighed further restrictions, both in industrial and developing countries.

In the group of industrial countries, Finland, Japan, Spain, and Sweden liberalized international capital transactions of commercial banks; France and Sweden opened possibilities for nonbanks to maintain accounts abroad; and France, Sweden, and Iceland allowed easier access to foreign borrowing by residents. In addition, Norway permitted foreigners to purchase domestic bonds; and Italy, Ireland, and Spain relaxed restrictions on outward portfolio investments. In developing countries, various members undertook measures to encourage foreign direct investment, and six members (Argentina, Brazil, Chile, Jamaica, the Philippines, and Venezuela) introduced or extended debt-equity conversion programs; Zambia introduced a similar program aimed specifically at the reduction of external payments arrears. Other important changes in developing countries include Korea’s program of liberalization, involving the opening up of the manufacturing sector to foreign investment, the raising of the limits on overseas investments exempted from government approval and monitoring, the reduction of tax privileges for foreign companies, and the liberalization of restrictions on the purchase of foreign real estate by Korean companies.

The general pattern of the main changes in restrictions in 1987 is indicated in Table 1, which shows the number of liberalizing and restrictive measures of different types reported in 1987 for industrial and developing countries. The table indicates a preponderance of liberalizing measures, both overall and in each of the main categories of measures, with the exception of those relating to imports, where the number of restrictive changes of industrial countries exceeded significantly the number of liberalizing changes. The table also suggests a continuation of the broad movement toward the liberalization of exchange and trade controls in the developing countries observed in the 1987 Annual Report, albeit from a considerably more restrictive base than in industrial countries. It also indicates a further dismantling of exchange controls on capital movements, both in industrial and developing countries.

Table 1Summary of Main Changes in Restrictions in 1987
Liberalizing

Changes
Restrictive

Changes
Industrial

Countries
Developing

Countries
Industrial

Countries
Developing

Countries
1.Imports
Quantitative controls547822
Other23685743
2.Exports
Quantitive controls678
Other641425
3.Current invisibles83817
4.Capital2427911
Total number of changes6622785126
Source: Appendix I.
Source: Appendix I.

During 1987 there were no changes in the status of Article VIII or Article XIV members. Indonesia adopted Article VIII status in May 1988. Total Fund membership remained at 151. Sixty-three Fund members have accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Articles of Agreement, and 88 members avail themselves of the transitional arrangements under Article XIV, Section 2. All members have notified the Fund of their decision regarding Article VIII or XIV status. Twenty-one members availing themselves of the transitional arrangements under Article XIV maintain exchange systems that are free of restrictions on payments and transfers for current international transactions. Thirteen of these countries are members of the West African Monetary Union (WAMU) or the Central African Monetary Area.

Developments in Exchange Rates and Exchange Arrangements

The nominal effective value of the U.S. dollar,1 which had declined by 28 percent from its peak in March 1985 through December 1986, fell further by 15 percent in the course of 1987. Among the various factors that have played a role in the depreciation of the U.S. dollar since early 1985, the effects of the large and persistent U.S. current account deficit on market expectations undoubtedly has been very important.

During 1987 several measures were undertaken that aimed at arresting the slide of the U.S. dollar: in particular, the Louvre accord in February 1987 expressed the commitment among the six major industrial countries to coordinate economic policy and so increase the emphasis on domestic policy adjustment in order to correct external imbalances. Following the accord, the dollar experienced relative stability, appreciating at times in the middle of the year. This reflected in part large-scale intervention by the monetary authorities of major industrial countries and a tightening of U.S. monetary policy in May 1987.

Downward pressure on the dollar re-emerged late in the year, however, reflecting the release of unfavorable monthly U.S. trade data and increasing uncertainties concerning economic prospects in the wake of the October stock market decline. On December 22 the Group of Seven issued a joint statement reaffirming the Louvre accord, and in the beginning of 1988 the dollar rose in response to continuing central bank intervention, higher interest rates in the United States, and favorable U.S. trade data. Downward pressure on the dollar re-emerged in March 1988.

Largely as a counterpart to the continuing slide of the U.S. dollar, the nominal effective exchange rates of the currencies of other industrial countries, except Australia, Italy, and Canada, appreciated considerably in 1987; i.e., Japan (15.8 percent), the United Kingdom (10.7 percent), and other major European countries (between 3-6 percent). Against the U.S. dollar, the Japanese yen rose in 1987 by 29 percent in nominal terms, and Japan’s current account surplus, in terms of U.S. dollars, stabilized. The pound sterling also appreciated strongly against the U.S. dollar by 27 percent, and to some extent against other major European currencies, despite the periodic interventions by the Bank of England to support the U.S. dollar. As for the currencies in the European Monetary System (EMS), their value vis-à-vis the U.S. dollar increased by 20-23 percent, except the lira. In January 1987 a realignment of the central rates within the EMS took place whereby the deutsche mark, Netherlands guilder, Belgian franc, and Luxembourg franc were appreciated against the basket of currencies determining the value of the European Currency Unit (ECU). The depreciation of the U.S. dollar and corresponding appreciation of most of the other principal currencies through 1985 and 1986 contributed to a greater variability in the principal exchange rates, as conventionally measured, than in the immediately preceding years. However, while the measure of exchange rate variability shows a significant decline for 1987, reflecting relative stability of exchange rates during large parts of the year, official intervention in exchange markets rose even more sharply, as indicated by international reserves movements in the industrial countries (Chart 2).

Chart 2Industrial Countries: Indicators of Exchange Rate Variability and Official Foreign Exchange Market Intervention, 1976–87

(Index: 1980 = 100)

Source: Fund staff estimates.

1 For each individual country, currency variability in any year is measured by the average absolute monthly percentage change of its exchange rate in terms of the SDR. The measure of average currency variability shown here is the trade-weighted average of the individual country variability measures, expressed as an index.

2 Sum of means of monthly total absolute changes in gross foreign exchange reserves, expressed as an index.

In the developing countries, the trend toward greater flexibility in exchange rate arrangements observed in previous years was reversed in 1987. A number of developing countries used the exchange rate instrument to strengthen their external position, although to a smaller extent than in 1986. The unweighted composite index of developing countries’ real effective exchange rates declined by 11 percent in 1987, compared to a decline of 17 percent in 1986. During 1987 the average unweighted exchange rate of currencies with pegged arrangements that were adjusted against the respective foreign currencies depreciated by 24 percent in nominal terms. For members with flexible arrangements, the average (unweighted) nominal depreciation against the U.S. dollar amounted to 14.7 percent, ranging from 0.4 percent for the Jamaican dollar to 80.9 percent for the Lebanese pound.

There were 14 reclassifications with respect to exchange arrangements of Fund members in 1987. Eight countries were reclassified in the direction of reduced flexibility, and three countries (Maldives, Mauritania, and Singapore) were reclassified from pegged exchange rates to floating arrangements.2

II. Developments in Exchange Arrangements and Exchange Rates

Fund members are required to notify the Fund of changes in their arrangements for determining their exchange rates, in accordance with members’ obligations under Article IV, Section 2(a), of the Articles of Agreement. Surveillance of exchange arrangements of members by the Fund, as required under Article IV, Section 3, is conducted in the context of regular consultations with members and during the intervening period between consultations, as changes in such arrangements are assessed by the staff and communicated to the Executive Board. Under the provisions of Article IV, Fund members have the right to maintain exchange arrangements of their choice (other than using gold as denominator).

Developments Affecting the Classification of Exchange Arrangements

To facilitate implementation of the Fund’s surveillance over exchange rate policies, members’ exchange arrangements may be classified under three broad groupings, as follows: (1) pegged arrangements, comprising currencies that are pegged either to another currency or to a currency composite, including the SDR, and currencies that display limited flexibility against another currency (quasi-pegs); (2) a middle group of managed flexibility, comprising currencies whose values are adjusted according to a set of indicators other than partner country exchange rates alone, or are maintained under a system of managed floating; and (3) “independently” floating (essentially market-determined) arrangements, including cooperative arrangements in the EMS, and independently floating regimes. The basic rationale for the classification of members’ exchange arrangements is the extent and form of the flexibility that these arrangements permit, and this criterion is also applied to subcategorize each of these broad groupings in Table 2.

Table 2Exchange Rate Arrangements as of March 31, 19881
Flexibility Limited vis-à-visMore Flexible
a Single Currency or
PeggedGroup of CurrenciesAdjusted

according

to a set of

indicators
Other

managed

floating
Independently

floating
Single currencyCurrency compositeSingle

currency2
Cooperative

arrangements3
U.S. dollarFrench francOtherSDROther
Afghanistan4Lao People’s Democratic Republic4BeninBhutan (Indian rupee)BurmaAlgeria4Bahrain5Belgium4BrazilArgentina4Australia
Antigua and BarbudaBurkina FasoBurundiAustriaQatar5DenmarkChile4People’s Rep. of China4Bolivia
CameroonKiribati (Australian dollar)Iran, Islamic Rep. ofBangaladesh4Saudi Arabia5FranceColombiaCanada
The Bahamas4LiberiaCentral African Rep.BotswanaUnited Arab Emirates5Fed. Rep. of GermanyMadagascarCosta Rica4
BarbadosMozambiqueJordanCape VerdePortugalDominican RepublicThe Gambia
Nicaragua4IrelandGhana4
BelizeOmanChadLesotho4 (South African rand)Libyan Arab Jamahiriya6CyprusItalyGuinea
DjiboutiComorosFijiLuxembourg4Egypt4Japan
DominicaPanamaCongoRwandaFinland7NetherlandsGreeceLebanon
Ecuador4Paraguay4Côte d’IvoireSeychellesHungaryGuinea-BissauMaldives
Peru4Equatorial GuineaSwaziland (South African rand)IsraelIceland
El Salvador4St. Kitts and NevisIndia8New Zealand
EthiopiaSt. LuciaKenyaIndonesiaNigeria4
GrenadaGabonKuwaitPhilippines
Guatemala4St. Vincent and the GrenadinesMaliTonga (Australian dollar)MalawiJamaicaSouth Africa4
Guyana4NigerMalaysia7KoreaSpain
HaitiSierra LeoneSenegalMaltaMauritania
HondurasSomaliaTogoMexico4United Kingdom
IraqSudan4MauritiusMorocco
SurinameNepalPakistanUnited States
NorwaySingaporeUruguay
Syrian Arab Rep.4Papua New GuineaSri LankaZaïre
Trinidad and Tobago
UgandaTunisia
Venezuela4PolandTurkey9
Viet Nam4RomaniaYugoslavia
Yemen Arab Rep.São Tomé and Principe
Yemen, People’s Democratic Rep.
Solomon Islands
Zambia
Sweden10
Tanzania
Thailand
Vanuatu
Western Samoa
Zimbabwe

No current information is available relating to Democratic Kampuchea.

In all cases listed in this column, the U.S. dollar was the currency against which exchange rates showed limited flexibility.

This category consists of countries participating in the exchange rate mechanism of the European Monetary System. In each case, the exchange rate is maintained within a margin of 2.25 percent around the bilateral central rates against other participating currencies, with the exception of Italy, in which case the exchange rate is maintained within a margin of 6 percent.

Member maintains dual exchange markets involving multiple exchange arrangements. The arrangement shown is that maintained in the major market. The dual exchange market in the Yemen Arab Republic was unified on January 1, 1988.

Exchange rates are determined on the basis of a fixed relationship to the SDR, within margins of up to ± 7.25 percent. However, because of the maintenance of a relatively stable relationship with the U.S. dollar, these margins are not always observed.

The exchange rate is maintained with in margins of ± 7.5 percent.

The exchange rate is maintained within margins of ± 2.25 percent.

The exchange rate is maintained within margins of ± 5 percent on either side of a weighted composite of the currencies of the main trading partners.

The Central Bank establishes its selling rate daily and the buying rate is set at ½ percent below the selling rate. Commercial banks must use the Central Bank’s selling rate, but are free to set their own buying rate.

The exchange rate is maintained within margins of ± 1.5 percent.

No current information is available relating to Democratic Kampuchea.

In all cases listed in this column, the U.S. dollar was the currency against which exchange rates showed limited flexibility.

This category consists of countries participating in the exchange rate mechanism of the European Monetary System. In each case, the exchange rate is maintained within a margin of 2.25 percent around the bilateral central rates against other participating currencies, with the exception of Italy, in which case the exchange rate is maintained within a margin of 6 percent.

Member maintains dual exchange markets involving multiple exchange arrangements. The arrangement shown is that maintained in the major market. The dual exchange market in the Yemen Arab Republic was unified on January 1, 1988.

Exchange rates are determined on the basis of a fixed relationship to the SDR, within margins of up to ± 7.25 percent. However, because of the maintenance of a relatively stable relationship with the U.S. dollar, these margins are not always observed.

The exchange rate is maintained with in margins of ± 7.5 percent.

The exchange rate is maintained within margins of ± 2.25 percent.

The exchange rate is maintained within margins of ± 5 percent on either side of a weighted composite of the currencies of the main trading partners.

The Central Bank establishes its selling rate daily and the buying rate is set at ½ percent below the selling rate. Commercial banks must use the Central Bank’s selling rate, but are free to set their own buying rate.

The exchange rate is maintained within margins of ± 1.5 percent.

In 1987, 59 changes in exchange arrangements occurred and were communicated by members to the Fund, including measures that resulted in adjustments to exchange rates and a number of changes in the form of composite pegs. In addition, developments in members’ effective (trade-weighted) exchange rates are also monitored continually on the basis of available data to facilitate the symmetry of treatment of pegged and flexible exchange rates; the Executive Board is notified of changes in excess of 10 percent on a “real” inflation-adjusted basis when they occur. Thirty-three such notifications of changes in real effective rates since the preceding consultation with the member (or previous notification) were made in 1987,3 compared with 53 notifications in 1986.

At the end of 1987,* 96 (96) members had pegged or quasi-pegged exchange arrangements, 28 (27) members had managed flexibility, and the remaining 26 (27) members had arrangements under which most or all of their currency relationships were wholly or partly independently floating (including the EMS currencies).4 From the inception of the present classification system in December 1981 to December 1987, the proportion of Fund members with “More Flexible” arrangements and those members maintaining a cooperative arrangement under the EMS rose from 28 percent to 36 percent; those with single currency pegs and “Flexibility Limited vis-à-vis a Single Currency” arrangements declined from 47 percent to 41 percent, and those with both currency composite arrangements decreased from 25 percent to 23 percent. The proportion of Fund members with independently floating arrangements rose from 7 percent to 13 percent, while the proportion maintaining a peg to the SDR declined from 11 percent to 5 percent.

Although there was nearly the same number of reclassifications of arrangements in 1987 as in 1986 (i.e., 14 against 13), most changes in 1987 were in the direction of reduced flexibility (eight countries) against more flexibility in 1986 (nine countries). Among the eight, six countries ceased their more flexible exchange rate arrangements and pegged their currencies to the U.S. dollar, which was depreciating in the course of the year: Guyana, the People’s Republic of Mozambique, and Sudan (from pegging to a currency composite); Sierra Leone and Zambia (from independently floating), and Somalia (from managed flexibility). The number of countries pegging their currencies to the U.S. dollar therefore increased sharply, from 32 to 38. Moreover, Israel’s exchange arrangement was reclassified from a managed floating arrangement to pegged to a currency composite, following respective changes in August 1986. In the opposite direction, three countries abandoned pegging their currencies to a currency composite and introduced floating arrangements: Maldives (independently floating); Mauritania and Singapore (managed floating). Egypt also moved to increased flexibility, introducing a market with a system of managed floating in addition to the already existing markets. In addition, Kenya and São Tomé and Principe modified their currency peg by moving from an SDR to another currency composite peg.

In addition, two members revised their exchange arrangements, yielding no net change in classification in the course of the year: Peru moved from pegging to the U.S. dollar to managed floating, but a few months later moved back to pegging to the U.S. dollar; and the Dominican Republic moved from independently floating to managed floating, and later moved back to independently floating.

Among developments affecting the classification of members’ exchange arrangements in the first quarter of 1988, Spain ceased to manage the float of the peso and adopted independent floating. Ecuador abandoned the arrangement of managed floating and opted for pegging to the U.S. dollar. The Dominican Republic moved from independently floating to managed floating. Vanuatu substituted a peg to another currency composite for an SDR peg, and Western Somoa was reclassified from a system of managed floating to pegging to a currency composite.

Developments in the Exchange Rates of Industrial Countries

A realignment of the central rates within the EMS was implemented on January 12, resulting in an appreciation of the deutsche mark, Netherlands guilder, Belgian franc, and Luxembourg franc. The Danish krone, French franc, Irish pound, and Italian lira all remained unchanged, and the notional ECU central rates5 for the pound sterling and Greek drachma were devalued.

On February 22, 1987 the ministers of finance and the central bank governors of the six major industrial countries met in Paris to discuss coordination of economic policy; they issued a communiqué, under the Louvre accord, calling for closer cooperation in maintaining exchange rate stability around current levels—considered to be within the appropriate ranges in light of underlying economic fundamentals. Japan and the United States issued a joint statement on May 1, 1987, reaffirming their previous commitment made at the 1986 Tokyo summit to coordination of economic policy, as well as to the understandings in the Louvre accord and the statement of the Group of Seven in Washington. Downward pressures on the U.S. dollar re-emerged in mid-August and prevailed throughout the last quarter of 1987, and the central banks of the major industrial countries intervened, both on an individual and coordinated basis; the seven industrial countries issued another statement on December 22, 1987, reiterating their commitment to the coordination of economic policy in order to keep exchange rates stable.

There were no changes in the classification of exchange arrangements of the industrial countries during 1987. Eight countries in the EC maintained their cooperative arrangements under the EMS (Belgium, Denmark, France, Germany, Ireland, Italy, Luxembourg, and the Netherlands). Austria and three Nordic countries (Finland, Norway, and Sweden) pegged their currency to a currency composite other than the SDR. The other Nordic country (Iceland) maintained a more flexible arrangement under managed floating. The currencies of the other six industrial countries (Australia, Canada, Japan, New Zealand, the United States, and the United Kingdom) floated independently.

The U.S. dollar depreciated sharply in the first quarter of 1987 in effective MERM terms.6 After appreciating slightly in the second quarter, it resumed its depreciation in the third quarter, declining sharply again in the fourth quarter to a level 15 percent below that of December 1986. Over the same period, the Japanese yen underwent the largest appreciation against the U.S. dollar (28.8 percent on an end-year basis), and the Canadian dollar recorded the smallest appreciation (6.2 percent) (Table 3).

Table 3Exchange Rate Movements of Currencies of Industrial Countries with “Cooperative” or “Independently Floating” Arrangements(December 31, 1986–December 31, 1987)
Exchange rate

Currency Units

per U.S. dollar

(End of Period)
MERM

Index

(1980 = 100)
Percentage

Appreciation (+)/

Depreciation (—)
In terms

of U.S. dollar
MERM
AustraliaDec. 31, 19861.504265.0
(dollar)Dec. 31, 19871.384163.3+ 8.7–2.6
Belgium/LuxembourgDec. 31, 198640.4185.4
(franc)Dec. 31, 198733.1588.7+ 21.9+ 3.9
CanadaDec. 31, 19861.380591.8
(dollar)Dec. 31, 19871.299890.7+ 6.2–1.2
DenmarkDec. 31, 19867.342592.2
(krone)Dec. 31, 19876.096596.5+ 20.4+ 4.7
FranceDec. 31, 19866.455075.5
(franc)Dec. 31, 19875.340077.5+ 20.9+ 2.6
Germany, Fed. Rep. ofDec. 31, 19861.9408111.2
(deutsche mark)Dec. 31, 19871.5815117.4+ 22.7+ 5.6
IrelandDec. 31, 19860.714582.0
(pound)Dec. 31, 19870.596885.4+ 19.7+ 4.1
ItalyDec. 31, 19861,358.171.9
(lira)Dec. 31, 19871,169.370.9+ 16.2–1.4
JapanDec. 31, 1986159.1162.2
(yen)Dec. 31, 1987123.5187.8+ 28.8+ 15.8
NetherlandsDec. 31, 19862.1920109.7
(guilder)Dec. 31, 19871.7775116.5+ 23.3+ 6.2
New ZealandDec. 31, 19861.910264.91
(dollar)Dec. 31, 19871.520971.7+ 25.6+ 10.41
SpainDec. 31, 1986132.39563.9
(peseta)Dec. 31, 1987109.068.2+ 21.5+ 6.7
United KingdomDec. 31, 19860.678271.3
(sterling)Dec. 31, 19870.534378.9+ 26.9+ 10.7
United StatesDec. 31, 1986117.8
(dollar)Dec. 31, 1987100.0–15.1
Source: International Monetary Fund, International Financial Statistics.

Nominal effective exchange rate.

Source: International Monetary Fund, International Financial Statistics.

Nominal effective exchange rate.

As in 1986, there were sizable movements in the nominal effective exchange rates of the currencies of most industrial countries in 1987. In effective (MERM) end-of-year terms, the largest appreciation was that of the Japanese yen (15.8 percent). Other appreciations ranged from 10.7 percent (the United Kingdom) to 2.6 percent (France), whereas the currencies of the following four countries depreciated in effective terms: Australia (2.6 percent), Canada (1.2 percent), Italy (1.4 percent), and the United States (15.1 percent).

Developments in Exchange Rate Arrangements in Other Countries

Other developments not affecting the classification of exchange arrangements among the countries with exchange rates pegged to a single currency or currency composite included devaluations effected by 13 countries, ranging from 1.2 percent (Burundi) to 92 percent (Viet Nam) (Table 4). Romania revalued its noncommercial exchange rate by 12 percent. Seven countries implemented other changes in their exchange arrangements, such as adjusting surrender requirements or changing the number of multiple exchange rates.7 Other changes that did not directly affect exchange rates were the ban on some exchange operations in Venezuela and the change of basket composition in Malta.

Table 4Changes in Exchange Rates of Currencies Pegged to Single Currency, SDR, or other Currency Composites, 1987
Country (Currency)Date of

Change
PegDomestic Currency

Units per U.S.

Dollar or

per SDR1
Percentage

Appreciation (+)/

Depreciation (–)

(in Terms of

U.S. Dollar, SDR,

or Currency

Composite)1
Old rateNew rate
Burundi (franc)January 5SDR151.5153.4–1.2
February 9153.4155.3–1.2
March 16155.3161.0–3.5
Fiji (dollar)June 29Other composite1.076021.3070–17.7
October 71.28341.5101–15.0
Hungary3 (forint)March 11Other composite44.69248.25–7.4
November 11–4.32
Israel (New Israeli sheqel)4Jan.–Nov.Other composite1.67831.7077–1.7
Malawi (kwacha)February 7Other composite1.88152.3519–20.0
Mozambique (metical)June 27U.S. dollar202.0404.0–50.0,
Peru (inti)October 255U.S. dollar15.8820.0–20.6
December 14620.033.0–39.4
Poland (zloty)7February 1Other composite193.252240.0–19.5
Romania (leu)October 1Other composite10.0489.0+ 11.6
Sudan (pound)January 5U.S. dollar2.9393.25–9.8
Uganda (shilling)10May 15U.S. dollar1,400.06,000.0–77.0
Viet Nam (dong)October 15U.S. dollar18.011225.0–92.0

The currency units and magnitude of devaluations are expressed in terms of the currency peg.

Exchange rate and percentage change expressed in terms of the U.S. dollar.

With effect also from March 11, the forint was appreciated vis-à-vis the transferable ruble by 3.7 percent.

On January 13, 1987 the new sheqel was devalued by 9.2 percent against its basket of currencies when the exchange arrangement was classified as “More Flexible: Managed Floating.”

In addition to the adjustment of the official rate, the number of import and export exchange rates was reduced from ten to seven, yielding a weighted nominal depreciation of about 26 percent in terms of intis per U.S. dollar.

With effect also from December 14, the number of export rates was reduced from three to two, and the number of rates applying to imports and service and capital transactions was raised from five to seven. These ranged from I/. 15.88 = US$1 to I/. 63 = US$1, the latter being the CD market rate.

With effect also from February 1, the zloty was depreciated vis-à-vis the transferable ruble by 17.4 percent, from Z1 95 = TR1 to Z1 115 = TR1.

Noncommercial exchange rate applies to non-trade-related services and transfers, with the exception of travel arranged through tourist organizations.

Effective exchange rate applicable to convertible currency export proceeds, depreciated due to change in distribution of these proceeds in the official market and the commercial bank market from proportions of 70 percent and 30 percent, respectively, to 50 percent in each market.

With effect also from May 15, a new currency was introduced, with 1 new shilling replacing 100 old Uganda shillings. Exchange rates above expressed in terms of the prereform currency unit.

Exchange rate applicable to trade transactions with the convertible area. The exchange rate for inward remittances was depreciated from D 96 to D 396 per U.S. dollar on April 21 and to D 504 per U.S. dollar on July 21. The official exchange rate, applicable to noncommercial transactions, was depreciated from D 80 to D 368 per U.S. dollar on December 1.

The currency units and magnitude of devaluations are expressed in terms of the currency peg.

Exchange rate and percentage change expressed in terms of the U.S. dollar.

With effect also from March 11, the forint was appreciated vis-à-vis the transferable ruble by 3.7 percent.

On January 13, 1987 the new sheqel was devalued by 9.2 percent against its basket of currencies when the exchange arrangement was classified as “More Flexible: Managed Floating.”

In addition to the adjustment of the official rate, the number of import and export exchange rates was reduced from ten to seven, yielding a weighted nominal depreciation of about 26 percent in terms of intis per U.S. dollar.

With effect also from December 14, the number of export rates was reduced from three to two, and the number of rates applying to imports and service and capital transactions was raised from five to seven. These ranged from I/. 15.88 = US$1 to I/. 63 = US$1, the latter being the CD market rate.

With effect also from February 1, the zloty was depreciated vis-à-vis the transferable ruble by 17.4 percent, from Z1 95 = TR1 to Z1 115 = TR1.

Noncommercial exchange rate applies to non-trade-related services and transfers, with the exception of travel arranged through tourist organizations.

Effective exchange rate applicable to convertible currency export proceeds, depreciated due to change in distribution of these proceeds in the official market and the commercial bank market from proportions of 70 percent and 30 percent, respectively, to 50 percent in each market.

With effect also from May 15, a new currency was introduced, with 1 new shilling replacing 100 old Uganda shillings. Exchange rates above expressed in terms of the prereform currency unit.

Exchange rate applicable to trade transactions with the convertible area. The exchange rate for inward remittances was depreciated from D 96 to D 396 per U.S. dollar on April 21 and to D 504 per U.S. dollar on July 21. The official exchange rate, applicable to noncommercial transactions, was depreciated from D 80 to D 368 per U.S. dollar on December 1.

Among the currencies subject to “more flexible” arrangements other than those of the industrial countries, most changes in exchange rates in 1987 involved depreciations in terms of the U.S. dollar, the more sizable of which were recorded by Argentina (67 percent), Brazil (80 percent), Lebanon (81 percent), Mexico (58 percent), and Yugoslavia (63 percent) (Table 5).

Table 5Changes in Exchange Rates of Currencies Subject to “More Flexible” Arrangements1(December 31, 1986-December 31, 1987)
Currency Units per U.S.

Dollar2

(End of Period)
Percentage Appreciation (+)/

Depreciation (–) (in

Terms of U.S. Dollars

per Currency Unit)
Dec. 31, 1986Dec. 31, 1987
Argentina (austral)1.25703.7500–66.5
Bolivia (boliviano)31,923,000.02.2100–13.0
Brazil (cruzado)14.9072.25–79.9
Chile (peso)204.73238.14–14.0
China (yuan)3.72213.7221
Colombia (peso)219.0263.7–17.0
Costa Rica (colón)58.969.3–15.0
Dominican Republic (peso)3.07664.9600–38.0
Ecuador (sucre)146.50221.50–33.9
Gambia, The (dalasi)7.42616.4387+ 15.3
Ghana (cedi)152.00176.0–13.6
Greece (drachma)138.76125.93+ 10.2
Guinea235.6300440.000–46.5
Guinea-Bissau (peso)235.63851.70–72.3
Iceland (krona)40.2435.66+ 12.8
India (rupee)13.122012.8772+ 1.9
Indonesia (rupiah)1,641.01,650.0–0.5
Jamaica (dollar)5.485.50–0.4
Korea (won)861.4792.30+ 8.7
Lebanon (pound)87.0455.0–80.9
Madagascar (franc)769.811,234.27–37.6
Maldives (rufiyaa)7.24439.3950–22.9
Mauritania74.080071.6000+ 3.5
Mexico (peso)923.52,209.7–58.2
Morocco (dirham)8.71177.8003+ 11.7
Nigeria (naira)3.31674.1413–19.1
Pakistan (rupee)17.2517.45–1.1
Philippines (peso)20.5320.80–1.3
Portugal (escudo)146.117129.865+ 12.5
Singapore (dollar)2.17501.9985+ 8.8
South Africa (rand)2.18341.9299+ 13.1
Sri Lanka (rupee)28.52030.763–7.3
Tunisia (dinar)0.84020.7779+ 8.0
Turkey (lira)757.791,020.90–25.8
Uruguay (new peso)181.0281.0–35.6
Western Samoa (tala)2.19782.0109+ 9.3
Yugoslavia (dinar)457.181,244.00–63.2
Zaïre (zaïre)71.1131.5–45.9

The information presented in this table relates to those members not included in Table 4 whose arrangements are classified in the category “More Flexible” as of December 31, 1987. Exchange rates shown are midpoints of buying and selling rates.

For those countries that maintain multiple rates, the rate shown is either that quoted by the authorities as the official rate or that used most widely in the country’s international transactions.

Bolivia introduced a new currency with effect from January 1, 1987, the “boliviano,” replacing the peso at the rate of 1 million pesos per boliviano.

The information presented in this table relates to those members not included in Table 4 whose arrangements are classified in the category “More Flexible” as of December 31, 1987. Exchange rates shown are midpoints of buying and selling rates.

For those countries that maintain multiple rates, the rate shown is either that quoted by the authorities as the official rate or that used most widely in the country’s international transactions.

Bolivia introduced a new currency with effect from January 1, 1987, the “boliviano,” replacing the peso at the rate of 1 million pesos per boliviano.

During 1987 the rate of depreciation of the real effective value of currencies of developing countries, on a weighted average basis, moderated to around 11 percent, compared to an average of 17 percent in 1986. A few member countries’ currencies (e.g., Korea) appreciated against the U.S. dollar, while those of some others (e.g., India, South Africa, and Greece) moved with the U.S. dollar, and many others depreciated strongly against the U.S. dollar (e.g., Argentina, Brazil, Mexico, and Nigeria). The latter group comprised mainly countries facing the most difficult adjustment problems.

III. Main Developments in Restrictive Exchange and Trade Practices

This chapter surveys major developments in members’ restrictive practices affecting international trade and financial transactions. These practices take the form of either quantitative restrictions or of price-related measures that involve implicit or explicit taxes and subsidies affecting international transactions. Most of the practices are described in detail in the chronological sections of the individual country pages in Part Two of this Report. References to the detailed descriptions in Part Two may be obtained from the tables annexed to Part One, which provide summary descriptions and evaluations and are organized on a subject basis—i.e., by the type of practice involved.

Quantitative Restrictions on Trade

In 1987 the use of quantitative trade restrictions by industrial countries, particularly of voluntary export restraint agreements, remained extensive, whereas cases of removals of such restrictions were few.

A limited number of conflicts involving agricultural products were avoided or temporarily resolved. In November 1987 the EC averted a trade conflict with the United States by delaying until January 1, 1989 a total ban on beef treated with growth hormones. In December 1987, following a GATT panel recommendation that Japan eliminate import curbs on ten categories of food products, Japan proposed to abolish eight of them and to relax curbs on the remaining two categories. The United States rejected this proposal, arguing that a GATT Panel Report can be accepted only in its entirety. In February 1988 the Panel Report was adopted by the GATT Council of Representatives.

The number of restrictions resulting from conflicts that were not resolved and new restrictions, however, exceeded the number of restrictions that were removed by industrial countries. Quotas were imposed on some agricultural products: in March 1987 Austria introduced quotas on imports of broken rice under the provisions of Article XIX of the GATT, and the United States decided to reduce its sugar import quota.

The year was also characterized by a sharp increase in the number of reported voluntary export restraint arrangements from 99 arrangements at end-1986 to 124 arrangements at end-September 1987. Of the latter, 69 protect the EC market or the market of one of its members, 48 protect the U.S. market, and 7 protect the Canadian market. The arrangements mainly limit exports of Japan (25), Korea (24), the EC (7), and Taiwan Province of China (6).

In sectoral terms, excluding arrangements under the MFA, the largest number of arrangements (38) pertained to steel products. The EC renewed 11 of its existing 14 arrangements with major steel suppliers and signed an agreement with Venezuela for the first time. New arrangements with South Africa were not possible following the introduction of sanctions by the EC against this country; the arrangement with Australia was not renewed, owing to the low level of steel imports originating from that country; and the arrangement with Japan was considered unnecessary because of an agreement in the form of exchange of letters that took place at the end of 1986. Spain, in March 1987, decided to limit temporarily imports of certain steel products as a safeguard measure. The United States maintained agreements limiting steel imports from 18 countries under a five-year program introduced in 1984, which was designed to reduce the share of imports, from about 26 percent of domestic consumption, to a target of 18.5 percent. In addition, Taiwan Province of China agreed to restrain steel exports to the United States, and steel exports from Sweden to the United States declined following consultations between these two countries. Finally, the United States announced plans to introduce new rules of origin for steel in order to monitor transhipments of steel through third countries not subject to voluntary restraint arrangements. The United States increased quotas on steel imports from Mexico.

Trade in the automobile and transport equipment sector was also widely regulated by means of export restraint agreements (14). Japan extended by one more year the voluntary restraint system in use since 1981 for car exports to the United States, which were to be kept at their current level of 2.3 million cars a year until March 1988.8 Also, the increase in car sales to the EC in 1987 was to be held at 10 percent of the 1986 level. By contrast, the voluntary export restraint on automobile exports to Canada lapsed in March 1987 and was not extended.

Following the decision by the GATT Textiles Committee in August 1986 to extend the Multifiber Arrangement (MFA) by a five-year period to July 31, 1991, a large number of bilateral arrangements were signed by industrial countries with other participating countries in 1987. Trade in textiles was further restricted by the negotiation of voluntary export restraint agreements with countries not participating in the MFA. The EC signed two agreements with associations of Turkish textile exporters, and the United States concluded arrangements with Bulgaria, the Dominican Republic, Trinidad and Tobago, and the U.S.S.R. Moreover, agreements were reached between the United States and Bangladesh, Brazil, the People’s Republic of China, Egypt, India, Mauritius, Pakistan, Sri Lanka, and Yugoslavia concerning limitations on certain textile and apparel imports from those ten countries not covered under existing control arrangements within the MFA. Textile companies in Korea and Taiwan Province of China agreed to curb certain textile exports to Japan at that country’s request, and France was authorized by the EC to introduce a temporary import suspension for some textile products from the People’s Republic of China, India, and Korea. These measures were objected to by the exporting countries.

Taiwan Province of China agreed to a voluntary export restraint arrangement on machine tools to the United States. Japan agreed to reduce or not to exceed a given share of the U.S. market for certain machine tools and Taiwan Province of China decided unilaterally to restrain certain exports of footwear to Canada. Australia agreed to a request by the United States for a voluntary export restraint on beef to 327,500 tons for calendar year 1987, and New Zealand accepted the introduction of a voluntary export restraint on meat exports to the United States. The United Kingdom introduced emergency measures to restrict urea imports from Hungary to 12,000 tons for 1987 and from Poland to 5,000 tons over the same period. Norway passed a bill prohibiting trade and exchanges with South Africa and Namibia. The United States announced in October 1987 a complete embargo on imports from the Islamic Republic of Iran as part of expanded sanctions against that country.

In developing countries the import liberalization trend that had been observed in 1986 continued in 1987. Among the fuel exporting developing countries, Indonesia granted import permits for certain products in the textile and manufactured steel categories. Tunisia liberalized its quantitative import controls by allowing unrestricted imports for enterprises exporting more than 15 percent of their output, permitting unrestricted imports up to the value of their exports to those enterprises exporting less than 15 percent of their output, and raising the limit on imports permitted without a license when payments are effected with funds from external sources. Moreover, most of the remaining raw materials and spare parts were transferred to an import certificate system. In Iraq private sector importers were allowed to import raw materials and capital equipment directly from suppliers abroad, provided payments were made from their own foreign exchange holdings abroad. In Ecuador the number of prohibited items and items previously requiring authorization was reduced, and certain quantitative restrictions on imports, mainly agricultural products, were abolished. No fuel exporting developing countries reported a tightening in their quantitative import control systems during 1987.

Most changes in quantitative import controls in non-fuel exporting developing countries were also in the direction of liberalization, and in some cases they encompassed far-reaching reforms. In Maldives the foreign exchange financing requirement through the banking system for the issuance of import licenses was abolished. In the Central African Republic import licenses and quotas were also abolished. In Madagascar a bidding system for some import licenses was introduced, and the amount of foreign exchange allocated for this bidding system was almost doubled in the course of the year. In Ghana the category of imports eligible for funding from the official foreign exchange auction market was expanded starting May 1987, with all imports becoming eligible for funding in that market by February 1988, except for five items specified in a negative list.

A number of non-fuel exporting developing countries substantially narrowed the range of imports subject to administrative licensing or prior authorization. Korea, in the framework of its five-year import liberalization plan, removed 167 items from the restricted list during 1987 and added 3 items to it; 50 items were removed from the import surveillance list and 2 items were added to it. In Guinea-Bissau import licenses are to be automatically issued for a list of goods, excluding petroleum, covering about 50 percent of commercial imports. Haiti, after having reduced the number of items subject to import licenses by two thirds in 1986, reduced them further in 1987 from 35 items to 7. In Argentina a number of items, including inputs for petroleum industry paper, paper products, chemicals, and petrochemical products, were excluded from prior authorization requirements. Also, a wide range of intermediate products was added to the list of goods eligible for the temporary admission regime. Peru granted automatic approval for capital goods imports of a value of up to US$3,000 a transaction and US$30,000 a year to export industries. Colombia transferred, on several occasions, goods from the prior license requirement list to a free list. Uganda introduced a form of open general license (OGL) for imports by key industries, and Nepal placed 26 items under OGL. The Philippines ceased requiring prior approval for the import of a number of raw materials, such as iron and steel, plastic, paper, tobacco products, polyester fibers, textile yarns, threads, glass, and food products. Honduras increased limits on imports not requiring import permits and prior authorization. Sri Lanka eliminated import licensing for yarns, textiles, and clothing.

Some developing countries removed items from prohibited lists. In Bangladesh certain items on negative and restrictive import lists were deleted, and the limits on industrial firms’ imports of restricted goods were doubled. India allowed the importation of raw cotton yarn for exporters, and Thailand permitted a number of tractors, and for a certain period soybean meal, to be imported. Niger abolished quantitative restrictions on cement and rice. In Western Samoa certain prohibited items were reclassified as restricted. In the Philippines, schedules for liberalization of certain goods in 1987 and by end-April 1988 were announced. Pakistan allowed duty-free imports of cotton yarn.

Only a few developing countries intensified their quantitative import restrictions significantly in 1987. Zambia required applications for foreign exchange or import licenses to be submitted to the foreign exchange management committee through the commercial banks. In addition, all applications for export retention schemes and the “No Funds Involved” import licenses were required to be approved by the Bank of Zambia, and “No Funds Involved” import licenses were restricted to imports of essential consumer goods, inputs, and machinery. The Netherlands Antilles established import quotas for 1987 and expanded the list of items subject to quotas later. In the Dominican Republic, for a period of five months, prior central bank approvals were required for import payments. In addition, a number of developing countries imposed quantitative restrictions on a product-by-product basis. Brazil transferred a number of items to the prohibited import list. Import licensing requirements were imposed on several items in two countries—the People’s Republic of China (civil aircraft, plywood, cyanide sodium, wood pulp, and soft drinks), and Thailand (potatoes, motorcycle engines, high fructose syrup, and weaving machines; licensing requirements on the latter were extended for another two years). Colombia transferred certain goods from the free to the prior license list, before reversing these actions several months later. Western Samoa reclassified three items as restricted. Israel prohibited imports of iron and steel products and gold coins from South Africa. Liberia disallowed mining, logging, and rubber companies to import petroleum for their own uses. Grenada put candles on the negative list.

Import Taxation and Import Surcharges

As in recent years, some industrial countries made further reductions in the level of most-favored-nation (MFN) import tariffs in 1987. By contrast, increases in tariffs by industrial countries were rare, but there were instances of retaliatory tariffs, and strains remained apparent in the trade relations between various countries, as evidenced by the number of investigations under existing legislation of alleged unfair trading practices and demands for compensation (and implementation of countervailing and antidumping duties) by domestic producers claiming to be injured by imports. Moreover, important changes were introduced by industrial countries in the functioning of the Generalized System of Preferences (GSP).

Australia decided at end-1986 to implement an overhaul of its tariffs for the chemical and plastic industries. In place of duties, some of which were above 30 percent, a new maximum rate of 15 percent will be phased in over three to four years, beginning in February 1988. A seven-year plan for a gradual restructuring of the textiles, clothing, and footwear industries will become effective on March 1, 1989; it will entail changes in tariff protection, including increases in tariffs of up to 60 percent, and the phasing out of all tariff quotas. The effective rate of assistance to these industries, which appears to have been contingent on the continued existence of strong antidumping safeguards, increased in 1986/87. Japan implemented tariff cuts on some 90 industrial imports; progressively reduced import tariff rates on unwrought aluminum and on aluminum sheet, plat, and strip to 1 percent and 3 percent, respectively; and removed tariffs on 33 industrial products and on cigarettes. Japan also adopted standards for imports of 47 electrical appliances. On July 1, 1987 New Zealand reduced tariffs that were above 25 percent and not covered by industry plans by 10 percent. On January 1, 1987 Switzerland implemented the last stage of the reduction of import duty rates pledged under the Tokyo round negotiations, and in parallel, reduced the preferential rates for developing countries on items that do not receive duty-free treatment. The United States restored Poland’s MFN status in February 1987, and thus terminated the sanctions imposed in 1981 and 1982 and at end-1986 and beginning-1987.

Increases in tariffs were rare. On April 17, 1987 the United States imposed retaliatory tariffs of 100 percent on US$300 million worth of Japanese imports. The U.S. authorities claimed that Japan had violated the September 1986 bilateral semiconductor arrangement by failing both to increase foreign access to its markets and by dumping Japanese semiconductors in third country markets. In June and November 1987 the retaliatory tariffs were lifted on US$136 million worth of Japanese goods which corresponded to the amount of third country dumping, but at end-1987 retaliatory tariffs on goods worth US$164 million remained in place. Also, a GATT panel was set up to investigate the EC complaint that Japan’s implementation of the United States-Japan agreement on semiconductors violated GATT rules. The EC adopted identical provisionary tariffs on the same products as the United States did to pre-empt diversion of Japanese exports to Europe. In March 1988 the GATT panel made a preliminary finding that upheld the EC complaint. In September 1987 the United States eliminated tariff-quota surcharges on motorcycles. Switzerland levied taxes on sugar imports.

Important changes were introduced in the functioning of the GSP by most major industrial countries in 1987. The EC revised its GSP system with respect to industrial products, reducing the number of sensitive products, eliminating 24 individual quotas, and increasing some preferential limits. Simultaneously, it implemented a differentiation strategy leading to the exclusion of 29 products/countries in cases where the supplier countries in question had demonstrated their competitiveness by accounting for over 20 percent of the EC’s total third countries’ imports of the product concerned. A similar system may be introduced for textiles in 1988. In December 1987 the EC decided to suspend Korea’s GSP benefits in retaliation for that country’s refusal to give EC exporters the same protection against counterfeiting as was given to the United States. Japan overhauled its GSP scheme to allow for more imports; ceiling limitations were removed on a broad range of industrial products for which preferential imports may be suspended only when they threaten to injure domestic industries. On other products, ceilings were increased by 30 percent on average. Like the EC, Japan increased the selectivity of its GSP scheme by reducing the individual country ceilings from one third to one fourth of the global product ceilings. The United States modified its GSP scheme substantially to give the most advanced developing countries a smaller share of the program’s benefits and to encourage third world nations to institute intellectual property rights protection and to grant their workers internationally recognized workers’ rights. Consequently, at end-1987 Chile was removed from the U.S. GSP scheme on labor rights grounds. In January 1988 Korea, Hong Kong, Taiwan Province of China, and Singapore were also removed from the scheme, effective January 1, 1989, with reference to their level of development.

The same number of antidumping measures were in force in industrial countries by early 1987 as at the beginning of 1986, thus halting the sharply upward trend of previous years. Among other measures,9 the EC imposed definitive antidumping duties on imports of outboard motors. Canada issued provisional antidumping duties on certain products (from several developed and developing countries), and definitive duties on others (from several countries). The United States implemented 100 percent antidumping duties on several steel products from Brazil, the Federal Republic of Germany, Korea, and the United Kingdom; on roller bearings from Italy, Japan, and Yugoslavia; on color picture tubes from Canada, Japan, Korea, and Singapore; and on aspirin from Turkey. In August 1987 the United States settled a dispute with the EC on subsidized pasta exports. Under the terms of the agreement, 50 percent of pasta exports from the EC will not benefit from subsidies, and on the remaining 50 percent, the subsidies were to be reduced by 27.5 percentage points.

The main development in antidumping duties stemmed from a change in EC regulations. In a move against foreign firms circumventing EC antidumping duties by setting up plants inside the Community, the Council of Ministers on June 22, 1987 extended its power to apply antidumping duties to manufacturers in the EC with close ties with companies outside the EC that are already subject to dumping duties, under the condition that the products are composed of more than 60 percent of parts imported from the country against which the antidumping duty had been imposed. Japan complained about this decision, arguing that it could damage direct investment by Japan in the EC.

Only a few antidumping or countervailing duties were eliminated. Australia terminated antidumping duties on imports of c.i. pigment blue and tires for passenger cars from Korea. Canada ended countervailing duties on imports of dry pasta from EC countries, and on imports of carbon steel pipes from Brazil.

Among other actions related to tariffs, Japan announced in early 1987, in response to long-standing complaints, that steps would be taken to reform its system of liquor taxes. Custom duties were to be cut by 30 percent in principle as from April 1987. But a number of countries supported the EC’s contention that these proposals did not go far enough and that the system would still be discriminatory, as smaller taxes were being imposed on lower-grade (mostly local) than on high-quality (mostly imported) liquor. It was decided on February 4, 1987 that the issue will be resolved under the GATT’s dispute settlement procedure.

In 1987 changes relating to import taxation in the group of developing countries were mixed. In fuel exporting developing countries, import taxation changes were on balance in the direction of greater restrictiveness. Although a tariff reform was undertaken in Tunisia and some duty-free imports were extended in Ecuador, tariffs on certain products were reinstated in Kuwait and, for certain items, raised in Indonesia and Oman. Ecuador extended duty-free imports of inputs used in export production to additional items. Trinidad and Tobago abolished the 12 percent stamp duty on books and newsprint. Kuwait, in the other direction, reinstated tariffs on certain iron and steel building materials. In Indonesia, although tariffs on 65 items were reduced, tariffs on 91 other items were raised and specific import duties were imposed on certain food products. In the People’s Republic of the Congo, an additional tax rate on imports of certain specified products was increased. Oman increased the customs tariff on cement.

Many non-fuel exporting developing countries reduced their tariffs on imported goods. Those doing so for a broad range of goods included Papua New Guinea, where the tariff structure was simplified and the general import levy was abolished. Korea reduced a number of basic tariff rates under the five-year tariff reform program and effected additional tariff cuts on a wide range of imports. Sri Lanka restructured its import tariffs, with the maximum rate reduced from 100 percent to 60 percent and the minimum raised from zero to 5 percent, with certain exceptions; also, import tariffs on certain motor vehicles were reduced. Colombia reduced import tariffs on capital goods and exempted military imports from import duties and taxes. Haiti replaced all specific tariffs by ad valorem tariffs. Mauritius reduced the maximum tariff rate to 127 percent, inclusive of stamp duties. Dominica abolished stamp duty on imports and unified customs service charges.

Several other developing countries reduced duties on a narrower range of goods. In Brazil tariffs on certain products were reduced on several occasions, with several items reduced to zero, and producers of manufactured goods were entitled to exemptions from import tax on intermediate and capital goods valued at more than 10 percent of the growth of the company’s exports over 1986. In South Africa import surcharges on a wide range of foodstuffs, raw material inputs, and components were eliminated. In Bangladesh, Benin, Sudan, and Thailand, tariffs on selected imports were reduced, and Korea lowered the tariff rate on crude oil imports. In Uruguay the official reference prices used to calculate import taxes on textile products were lowered by 10 percent. In addition, combined effective tariff rates were reduced.

Tariff reductions in the context of international or bilateral agreements were also carried out in a few developing countries. Greece reduced the regulatory tax on imports from other EC countries by 20 percent; this tax is to be phased out by January 1989. Israel lowered customs duties on imports from the EC and the United States. Chad announced a reduction on 80 percent of tariffs by 1990 and an increase on the other 20 percent, in the context of its re-entry into the Central African Customs and Economic Union.

In certain other countries changes in the taxation system or in tariff rates were, on balance, mixed. Costa Rica introduced surcharges on raw materials and capital goods, but eliminated those on consumer goods. The People’s Republic of China raised duties on certain brands of varnishes and lacquers, color film, and certain brands of watches, but reduced duties on a few mineral products to 6-15 percent. Bolivia replaced the preferential tariff rate of 2 percent for imports of the State Petroleum Company (YPFB) by the uniform 20 percent rate applying to most imports, but granted interest-free deferment over three years on customs duties for capital goods.

Several non-fuel exporting developing countries increased tariffs on a broad range of products. Argentina introduced an additional import surcharge of 5 percent through December 1988. Bangladesh raised the development surcharge on dutiable imports. Guatemala introduced a tax on imports, with exceptions. Malawi raised import duty rates on luxury and nonessential goods, increased the maximum import duty rate from 45 percent to 75 percent, and the import levy from 5 percent to 10 percent. Sierra Leone revised a wide range of import taxes upward. Turkey raised the rate of import levies. Burkina Faso increased the statistical tax from 3 percent to 4 percent. In Benin a new tax on import licenses was introduced. Pakistan raised the import license fee from 2 percent to 4 percent. The Dominican Republic introduced and raised the exchange commission on sales of foreign exchange for imports to 5 percent, and later to 20 percent. In Hungary the customs clearance fee was increased from 2 percent to 4 percent, and the statistical fee from 3 percent to 5 percent. Nicaragua applied an exchange tax to imports of nonessential consumer and capital goods in the nonagricultural sector, as well as spare parts and capital goods used in the agricultural sector.

Some of the non-fuel exporting developing countries increased tariffs on a narrower scope. India increased customs duties on metal products and inputs used by manufacturers of capital equipment and electronics. Korea levied an import surcharge on coffee and raw sugar. Niger increased taxes on rice and cement imports. Côte d’Ivoire increased import duties on specified products as a temporary measure. Antigua and Barbuda levied a customs tariff of 30 percent on meat.

Advance Import Deposits

In 1987 virtually all of the modifications of advance import deposit requirements by developing countries were in the direction of liberalization. The most significant change was in Greece, where advance import deposit rates were halved in February 1987, and the scheme was eliminated in May 1987. Israel reduced advance import deposit rates from 15 percent to 3 percent. The Philippines reduced the margin deposit requirement on import letters of credit from 100 percent to 50 percent. Bangladesh reduced the foreign exchange deposit requirement for industrial raw material imports. The Syrian Arab Republic allowed owners of industrial plants and agricultural importers to import equipment, spare parts, and raw materials, as well as all types of animal feed not produced domestically, without prior import deposits. Egypt modified the existing advance deposit scheme that required prior import deposits of 15-50 percent on private sector imports to be constituted in foreign exchange, by introducing another scheme that requires a prior deposit of at least 35 percent in foreign exchange or local currency at the time when the opening of a letter of credit is requested. This deposit cannot be financed domestically or by foreign borrowing. When the letter of credit is opened, an additional deposit of 65 percent has to be constituted in local or foreign currency; this deposit can be financed. Western Samoa eliminated advance deposit requirements for imports of motor vehicles. In the opposite direction, Guinea introduced advance deposits for certain imports in January 1987; however, they were eliminated in May. Finally, Ecuador introduced a prior import deposit requirement.

Other Measures Affecting Import Payments

Some developing countries made modifications in 1987 to regulations governing the terms or procedures for import payments. As in other recent years, most of these changes were in the direction of liberalization, although in fewer countries than in 1986.

In the group of fuel exporting developing countries, Venezuela accommodated importers in several ways. The central bank was authorized to give advances to importers upon presentation of import permits. In addition, the cost of letters of credit was allowed to be added to the amounts eligible for obtaining foreign exchange at the officially determined, more appreciated exchange rates applicable to the respective imports. Exporters in Venezuela also received preferential treatment for their basic import needs, and a separate foreign exchange budget was created for private exporters. At the same time, a new import control system was introduced, based on an annual budget that allocates foreign exchange among importers at the beginning of each year. In the opposite direction, Indonesia imposed a requirement for importers of cotton to purchase domestically produced cotton at a specified ratio relative to imported cotton.

A few non-fuel exporting developing countries liberalized exchange regulations for import financing. Egypt, on several occasions, liberalized the use of foreign exchange obtained from the new bank market and export retention accounts to finance imports and services by the private sector. Guinea-Bissau permitted private sector importers with valid import licenses to use foreign exchange freely to finance imports. In Guinea, although all imports were made eligible to be effected through the auction market, a phased settlement was required for those imports effected through that market. Portugal suspended the requirement on foreign financing for imports of petroleum and cereals. In Zaïre requirements for prior approval from the Bank of Zaïre were lifted for various categories of imports, and limits on imports beyond which importers are required to submit verification certificates to their banks were raised. Regulations for imports of certain goods were also relaxed in a few non-fuel exporting developing countries. In Thailand the required percentages of domestic purchases of silk yarn and soybean meal were reduced. Niger abolished restrictions on the number of traders authorized to import rice and cement.

Some non-fuel exporting developing countries tightened their regulations affecting imports and import payments. Sierra Leone abolished unnumbered import licensing, which effectively disallowed private imports of goods financed by foreign exchange from parallel markets. Peru imposed a 180-day minimum financing requirement for capital goods imports, and Fiji required authorized banks to report all sales of foreign exchange for import payments.

State Trading

There were few changes in the state trading practices of Fund members in 1987, with two non-fuel exporting developing countries introducing changes in the direction of liberalization, and one introducing new restrictions. Hungary expanded general trading rights of enterprises with exports of more than US$1 million in the previous year. In the People’s Republic of Mozambique, enterprises were allowed to import and export directly, as well as through state trading companies. Moreover, the number of items to be traded through state trading companies was first reduced from 11 to 8 and then to 5 for import items, and from 3 to 1 for export items. All private exports of gold and diamonds were prohibited in Sierra Leone; only the government office of gold and diamonds and the Bank of Sierra Leone were authorized to export gold and diamonds, respectively.

Exports and Export Proceeds

Reflecting the difficult international environment, measures taken during 1987 governing exports and export proceeds followed a trend in the direction of restraint among industrial countries. Seven industrial countries introduced new or modified existing measures, mostly in the area of voluntary export restrictions; some extended access to special credit facilities, whereas others relaxed licensing procedures. Developing countries continued to promote exports through fiscal and other incentives, by extending special credit facilities and by relaxing export licensing requirements. More than 30 developing countries combined several types of measures in an effort to support exporters.

During 1987 quantitative export control measures taken by industrial countries were largely of a restrictive nature. Responding to pressures from other industrial countries, Japan extended voluntary restraints on exports of cars and introduced restraints on exports of machine tools to the United States and forklift trucks to the EC. Taiwan Province of China also agreed to restrain machine tool exports to the United States. Norway and Sweden imposed prohibitions on exports to South Africa and Namibia. A number of developing countries also adopted restrictive measures; Israel banned new defense contracts as well as exports of oil to South Africa. Responding to threats of protectionist measures from industrial countries, Korea subjected a list of items to voluntary restraints. India banned exports of frogs’ legs; and the Lao People’s Democratic Republic prohibited exports of unprocessed gnarled wood; Ethiopia restricted the export of hides and skins, and Pakistan imposed quotas on exports of cotton yarn. Four developing countries liberalized their export regulations. Sri Lanka allowed rough gueda conumdum to be exported to Thailand and increased the value of gifts of domestic produce and commercial samples that can be sent abroad. The re-export of imported goods and exports of cotton by registered private sector exporters, subject to certain conditions, was liberalized in Pakistan. The export ban on sorghum was lifted in Sudan, and Uruguay allowed live sheep to be exported.

In the area of export licensing, only one industrial country modified its regulations. The United States expanded controls on exports to the Syrian Arab Republic and the Islamic Republic of Iran but relaxed licensing procedures and lifted restrictions on exports of oil and gas equipment to the U.S.S.R. Among developing countries, Honduras reduced licensing requirements, and licensing fees for exporters residing in border provinces were reduced in Thailand, except for exports of live black tiger shrimp. Licenses for exports of nontraditional products were terminated in Sri Lanka. All private export licensing for gold and diamonds was suspended in Sierra Leone, with the Government and the Central Bank becoming the sole exporters of these commodities.

Several countries introduced or modified fiscal incentives for exports. Among industrial countries, New Zealand eliminated the export performance tax incentive. Argentina extended the range of products qualifying for indirect tax rebates, and fiscal incentives were introduced for indirect exporters in Sri Lanka. Pakistan extended the drawbacks of import duty and sales tax that exporters pay on raw materials to include the 5 percent Iqra surcharge, the 5 percent import surcharge, and the 4 percent import license fee. Jamaica introduced a rebate for manufactured goods exported to non-Caribbean Common Market (Caricom) countries. A foreign exchange rebate equivalent to 5 percent and 10 percent for traditional and nontraditional exports, respectively, was introduced in Bolivia; and the scope of the export premium payment scheme was expanded in Chile, Côte d’Ivoire, and Turkey (with the exception of cotton for which premium payments were discontinued). Tax exemptions were revised downward in Uruguay and subsidies on exports to the EC were reduced in Greece. Among fuel exporters, Venezuela streamlined administrative procedures for subsidy payments.

Relatively few developing countries revised regulations on export taxation. Dominica introduced a levy on the export of bananas. Taxes on exports of coffee and cocoa were increased by Sierra Leone; Haiti eliminated export duties altogether; and Honduras reduced taxes on exports of coffee and bananas. Argentina eliminated export taxes on several products and reduced taxes on others. The tax rate on exports of cashew nuts was reduced by Guinea-Bissau, and taxes on all other products were abolished; Zaïre also eliminated taxes on exports of most agricultural products, and nontraditional and marine exports were freed from duties in Sri Lanka. Pakistan imposed an export duty on cotton yarn equivalent to PRs 5 per kilogram. Among fuel exporters, Indonesia abolished surcharges on coffee exports.

Increased access to credit facilities was extended to exporters by a small group of developing countries (Argentina, Thailand, and Turkey). There was only one major change relating to the provision of export or exchange guarantees. Venezuela eliminated the requirement to provide export guarantees by the central bank to exports to the Netherlands Antilles.

Two industrial countries, Belgium and Luxembourg, simplified reporting procedures in 1987, and Italy raised the foreign currency requirement for export credit granted to foreign firms to 75 percent. Regulations on requirements for surrender of proceeds from export activities were modified in several developing countries, mostly in the direction of increasing the percentage of proceeds permitted to be retained by exporters. Afghanistan and Colombia reduced the minimum surrender required of exports proceeds. Egypt abolished surrender requirements for several private sector exports, and certain specific private and public sector exports were transferred from the commercial bank pool to the more depreciated new bank market rate. However, the transfer of balances in retention accounts to free accounts was prohibited; the use of 25 percent of the balances in the retention accounts was permitted for payments on some specified invisibles without prior authorization. In Mauritania exporters were authorized to retain 15 percent of proceeds to be applied to payments related to the same activity; in Tanzania the retention rate for all nontraditional exports was set at a maximum of 50 percent and at 30 percent in São Tomé and Principe, to finance imports of specified capital goods and inputs. By contrast, early in the year the Dominican Republic introduced a requirement for the surrender of proceeds from exports of sugar and mineral products and established a mandatory deposit requirement, and Sudan and Zambia required all exporters to surrender export proceeds to the central bank.

Developing countries that took other measures related to exports in 1987 included Liberia, which required that exports of wood have at least 25 percent local processing content; Thailand, which adjusted the maximum value of each export transaction allowed without approval to B 50,000; Malaysia, which permitted export receipts to be effected in any other currency except those of Israel and South Africa; and Honduras, which introduced a transferable certificate of foreign exchange (Centra).

Among the fuel exporters, two countries took measures to liberalize surrender requirements; in Syria the 50 percent of export proceeds that exporters were authorized to retain was raised to 75 percent, and the extensive list of exporter categories was expanded; Venezuela relaxed the requirement to surrender export receipts, but eliminated the ability to effect exports in local currency. On the restrictive side, Ecuador and Syria both shortened the period for repatriation of export proceeds.

Current Invisibles and Transfers

Changes in regulations governing current invisibles resulted in a reduction of restrictions during 1987, continuing the trend that emerged in 1986. Most of the measures took the form of increased foreign exchange allocations for overseas travel, although several countries eased regulations on other invisible transactions allowing repatriation of profits and transfer of dividends and royalties. Only a few developing countries tightened current invisible transactions, mainly aiming to control capital flight.

Limits on foreign currency acquired by residents traveling abroad were raised in three industrial countries (Iceland, Ireland, and Italy) and eliminated in France and Spain. Ireland also increased the maximum allowance that may be authorized by commercial banks without reference to the central bank. Ten developing countries relaxed regulations on foreign exchange allocations for travel (Cyprus, Greece, Guinea, Hungary, Israel, Korea, Lesotho, Morocco, Sri Lanka, and Turkey). In Korea the use of credit cards abroad was liberalized, and both Korea and Pakistan increased monthly allowances for students abroad and other miscellaneous transfers. Commercial banks were given extended authority to deal in foreign exchange in Turkey. India liberalized the scheme that permits exporters to use their foreign exchange holdings. By contrast, annual limits on gift remittances were tightened by Fiji, the per trip travel allowance was reduced by Fiji, Peru, and Suriname, and holiday travel allowances ceased to be granted in Zambia. Israel increased its foreign travel tax, but eliminated surcharges on purchases of tickets for traveling abroad and increased exchange allowances for family support, higher education, and gifts. Egypt introduced a limit of 25 percent on the proportion of retained export proceeds that can be used freely to finance specified invisibles.

Regulations governing the import and export of foreign and domestic currency notes and holdings of foreign currency were relaxed in two industrial countries. Italy raised the limits on exportation and liberalized the importation of bank notes by residents and nonresidents; and Spain lifted restrictions on exports of foreign currency notes and traveler’s checks. Among the group of developing countries, deposits to foreign currency accounts were eased in Colombia, and Egypt abolished the requirement that nonresidents must convert U.S. dollars at the commercial bank pool rate when entering the country. Sri Lanka required foreigners, upon entering the country, to declare foreign exchange only in amounts greater than US$100 in currency notes or US$1,000 in monetary instruments. The amount of domestic currency notes travelers can take out or bring into Yugoslavia was increased. Regulations were tightened in Sierra Leone as holding of foreign exchange beyond the three-day limit was made illegal. Peru introduced a prior approval requirement by the central reserve bank on making payments for nonfinancial services abroad.

Several measures were taken by developing countries with regard to outward transfers or payments for services rendered by nonresidents, mostly in the direction of liberalizing existing regulations. Transfers of remittances abroad by expatriate workers were relaxed in Guinea, Jamaica, and Burundi; however, annual limits on remittances were set for expatriates on contract employment in Zambia. Foreign banks were allowed to repatriate their profits from Greece, but limits on remittances of dividends and profits to nonresidents were reduced in Zimbabwe, and remittances from Fiji of retained profits accumulated in previous years were restricted. Dividends and royalties were permitted to be transferred in full in Guinea. Egypt transferred from the commercial bank pool to the new bank market specified public and private sector invisible payments and allowed Law 43 companies (joint ventures) to transfer profits abroad through the new bank market, provided that funds in their capital and working accounts had been fully utilized. The same provision applies to funds in export retention accounts for payments of public and private sector invisibles. The surrender requirement for proceeds from invisibles transactions introduced earlier in the year in the Dominican Republic was abolished.

Other related measures included the gradual reduction of a preferential exchange rate for payments of eligible debt in Chile; and in Guinea private individuals, upon the sale of gold to the central bank, are to be paid up to 50 percent in foreign exchange and in cash.

A debt conversion scheme under which remittances of dividends abroad are allowed after four years was introduced in Argentina. Interest payments on official loans and debt accrued to nonresident commercial banks are subject to deposit at the central bank of Brazil.

External Payments Arrears

The Fund’s data on members’ external payments arrears include arrears that have been caused by exchange restrictions on current payments or transfers, as well as arrears on financial obligations of which the obligor is the government.10 The existence of arrears adversely affects the country’s creditworthiness, with the result that access to normal means of international financing is frequently curtailed. A further consequence is that the cost of international credit, as well as of imported goods and services, becomes higher than would otherwise be the case for most borrowers. In view of the particularly adverse consequences for the country maintaining arrears and for the international payments system, the elimination or substantial reduction of payments arrears in an orderly and nondiscriminatory manner constitutes an important element of members’ economic programs supported by the use of the Fund’s resources.11 Moreover, the incurrence of arrears and policies of members giving rise to them have been subject to careful scrutiny in the context of Article IV consultations with the Fund. The Fund has also consistently followed the practice of not approving under Article VIII, Section 2(a) of the Fund’s Articles of Agreement exchange restrictions evidenced by arrears on current international payments, except when a satisfactory program for the reduction or the elimination of arrears is in place.

From a peak of SDR 44 billion recorded at the end of 1984, external payments arrears of Fund members are estimated to have declined by over SDR 7 billion in 1985 and increased again by about SDR 8 billion in 1986. Provisional data indicates that the amount of arrears decreased significantly in 1987, possibly by SDR 7 billion. The number of countries experiencing arrears fell to 56 at end-1987 from 58 the year before; this number had been rising continuously from 1976 to 1986 (lending emphasis to the difficulty of eliminating arrears once they have been incurred). Of the countries for which data are available, 25 experienced increases in existing arrears and 21 were able to reduce arrears. Arrears were eliminated in five countries (Afghanistan, Cape Verde, Gabon, Jamaica, and Western Samoa); two countries (Burma and Panama) incurred external arrears for the first time in 1987, and arrears re-emerged in one other country (Ecuador).12 The large reduction in the amount of arrears outstanding was mainly due to debt reschedulings. Three countries (Brazil, Egypt, and Poland), which had one quarter of all outstanding arrears at the end of 1986, accounted for 90 percent of total reschedulings of arrears in 1987. Overall, 19 Fund member countries that had external payment arrears concluded multilateral debt renegotiations with official and commercial creditors in 1987.

At the end of 1987, 24 countries had adjustment programs supported by stand-by or extended arrangements in effect. Of these, 15 had external payments arrears at the time of program approval. Ten of the programs provided for an elimination of payments arrears in the first year, and the remaining five for a reduction during the program period, through a combination of rescheduling and cash payments. In two cases, a counterpart deposit requirement in local currency was introduced as a means of providing more comprehensive information on arrears and of sterilizing the expansionary liquidity impact associated with the incurrence of external arrears.

Multiple Currency Practices

Article VIII, Section 3, of the Fund’s Articles of Agreement prohibits a member from engaging in, or permitting its fiscal agencies to engage in, any discriminatory currency arrangements or multiple currency practice, except as authorized or approved by the Fund. Such practices may involve the existence of separate exchange rates, the application of exchange rate taxes or subsidies, inadequate payment of interest on advance import deposits and counterpart deposits against payments arrears, significant exchange rate spreads between buying and selling rates for spot transactions, and broken cross rates. The Fund approves multiple currency practices only when a well-conceived plan is in place to bring about their elimination or substantial simplification during a relatively short period of time. In many instances, the staff assists the authorities in formulating such a plan, usually in the context of adjustment programs supported by the use of Fund resources. The Executive Board most recently conducted a review of the Fund’s experience and policies with respect to multiple exchange rate regimes in April 1984 and February 1985.

The trend that emerged in 1985 toward reduced reliance on multiple currency practices continued through 1987. During 1987, 16 member countries either eliminated or simplified multiple currency practices, including cases where the coverage of transactions for market-determined/market-related exchange rates was expanded. Measures increasing the complexity of existing multiple currency practices were introduced by five members, and two members reintroduced a multiple currency practice in 1987 after having eliminated it in 1986.

Multiple currency practices were eliminated by four Fund members in the course of 1987. In Greece the non-interest-bearing advance deposit scheme for import payments introduced in November 1985 was abolished in May, following a substantial reduction in deposit requirements under the scheme in February. In Sudan the official and the commercial bank exchange rates were unified in October, virtually unifying the exchange rate system as a whole with the exception of an accounting currency maintained for transactions under a bilateral payments agreement. In Trinidad and Tobago the exchange system was unified in January, as the preferential exchange rate applied since December 1985 to essential imports ceased to be applicable. In Zaïre the official exchange rate was reunified, as of mid-April, with the exchange rate applied by the commercial banks, after a spread in excess of 2 percent between the official exchange rate and the commercial bank rate had arisen in October 1986.

During 1987, 12 members made progress in either simplifying multiple currency practices or reducing the distortions associated with them, including the transfer of transactions to more market-related exchange rates. In Argentina a more market-related exchange rate was introduced in November in addition to the existing official rates to cover transactions previously effected in parallel markets. In Bangladesh the authorities reduced the spread between the official and the secondary rates to within 5 percent by the end of 1987. In Brazil the financial transaction tax of 25 percent applying to purchase of foreign exchange for imports of goods and services was reduced to zero for specified import goods for the remainder of the year. In the Dominican Republic an exchange commission of 2 percent on the f.o.b. value was imposed in January on purchases and sales of foreign exchange for merchandise trade transactions, and the rate applied to merchandise imports was subsequently raised to 5 percent in June. In November the exchange commission applied to merchandise exports was eliminated, but the rate applied to merchandise imports was further increased to 20 percent. However, in February, the preferential exchange rate introduced in October 1986 and applied to public sector imports and debt service payments was abolished. Following a suspension of the free market float in June, a dual exchange market emerged temporarily, until, in November, a market-determined exchange rate was re-established, unifying the official and unofficial parallel exchange markets with the official rate set at the prevailing rate in the parallel markets.

In Ghana the official exchange rates were unified in February, and after the unification, the scope of the auction market was broadened significantly, reducing the amount of foreign exchange being channeled into retention and other accounts held outside the official banking system. In Guinea the scope of the auction market was broadened in January, when all import and invisibles payments were made eligible to purchases of foreign exchange at the auction market, with the exception of certain limits applied to purchases for tourist travel and the transfer abroad of salaries by expatriate workers. However, certain imports, including imports settled with foreign exchange obtained from sources outside the official market, continued to be effected outside the official market. An advance import deposit scheme for certain import payments introduced in January was discontinued in May. In Guyana a secondary foreign exchange window was established in February to operate with market-related exchange rates at commercial banks aimed at bringing parallel market transactions into the organized foreign exchange market, while special exchange rates applied previously to exports of rice and to exports of gold and diamonds were eliminated in January and September, respectively.

In the Lao People’s Democratic Republic the number of different exchange rates was reduced, in September, from seven to four. In Nigeria the official exchange rate was unified with the rate determined in the auction market, but a difference continued to exist between the exchange rate in the auction market for the sale of official receipts to authorized dealers and the exchange in the autonomous market for resale of these auctioned amounts and all other foreign exchange receipts and payments. In Peru a number of modifications were made to the exchange arrangements, involving a devaluation of the official exchange rate against the U.S. dollar, changes in the specified percentages of the official exchange rate that apply to various categories of exports, imports, service, and capital transactions, and changes in the coverage of the various categories of transactions that qualify to the different exchange rates. With these measures, the number of exchange rates applying to merchandise imports (including interest and commissions on financing) increased to six, and the number of rates for service payments and capital transactions was reduced from five to four.

In Somalia the official market, the free market, and the auction market were unified in June through the extension of the auction market; a special exchange rate was maintained for petroleum imports. The foreign exchange auctions were discontinued in September and the exchange rate was pegged to the U.S. dollar in October. In Zambia a dual exchange system emerged with the reintroduction of the auction market in March following its suspension in January, as the official exchange rate continued to apply to government procurement of medical and educational supplies and to the Bank of Zambia for external debt service and the proceeds from external loans and grants. The dual market was unified in May, when the exchange rate of the kwacha was pegged to the U.S. dollar.

A modification in multiple currency practices occurred in Egypt, where a phased process of unification of the commercial bank pool with a new bank market was underway in 1987. The new bank market rate was introduced in May, and by end-1987 most transactions had been transferred from the commercial bank pool to the new bank market; all private sector imports and specified invisibles payments by the private sector were also permitted in this market.

Five members increased the complexity of existing multiple currency practices. In Bolivia an export subsidy scheme was introduced in July, under which exporters receive rebate certificates equivalent to 5 percent of the f.o.b. value of traditional exports and equivalent to 10 percent of the f.o.b. value of nontraditional exports. In Ecuador an advance import deposit scheme eliminated in August 1986 was reintroduced in October. In Nicaragua the proportion of foreign exchange proceeds from nontraditional agricultural exports eligible for surrender at the “free” exchange rate was raised from 25 percent to 50 percent. However, in June an exchange tax was imposed on imports of many nonessential consumer goods and nonagricultural capital goods as well as on certain spare parts and capital goods for agriculture. In Romania the spread between the exchange rates for commercial and noncommercial transactions widened as a result of an appreciation of the rate for noncommercial transactions. Two members that did not maintain a multiple currency practice at end-1986 introduced such a practice in 1987. In Ecuador the spread between the central bank intervention rate and the free market rate, which had been kept within a margin of less than 2 percent since August 1986, widened considerably since February 1987. In Grenada the tax on sales of foreign exchange applying to all sales of foreign exchange by commercial banks with the exception of sales for certain specified imports and remittances was raised to 5 percent in October; the rate had been reduced from 5 percent to 2 percent in February 1986, thus eliminating the feature characterizing it as a multiple currency practice.

Bilateral Payments Arrangements and Countertrade Practices

The 1987 Annual Report on Exchange Arrangements and Exchange Restrictions reported that, at the end of 1986, the total number of bilateral payments arrangements maintained between Fund members was 69, compared with 50 at the end of 1985, and that a total of 72 bilateral payments arrangements were maintained between Fund and non-Fund members, compared with 89 at the end of 1985.13 The Report pointed out that these changes in the number of bilateral payments arrangements during 1986 were primarily attributable to the accession of Poland to membership in the Fund; excluding those involving Poland, the number of bilateral payments arrangements increased by three in 1986. During 1987 no Fund members concluded or terminated bilateral payments with other Fund members or non-Fund members, so that the total number of bilateral payments agreements maintained between Fund members and between Fund members and non-Fund members remained unchanged at 69 and 72, respectively.

Detailed information on the value of trade conducted under bilateral payments arrangements is not available for most Fund members maintaining such arrangements. Since the value of trade between Fund members maintaining bilateral payments agreements represents the maximum value of trade that could have been conducted under bilateral payments arrangements, the total value of such trade was much less than 1 percent of the total value of world trade of Fund members in 1987.

In recent years, an increasing number of countries have resorted to trading practices known as countertrade arrangements.14 These arrangements have taken a variety of forms, but basically they involve barter or quasi-barter arrangements between private firms and/or government entities, such as foreign trade organizations, under which the seller is obligated to accept specified goods or services from the buyer. Even though countertrade arrangements are for the most part carried out by private firms without official sanction, a number of countries have recently announced guidelines to be followed by individual entities while engaging in countertrade or issued regulations making countertrade mandatory for certain international transactions. The more common countertrade arrangements are known to have involved exchanges of crude oil for manufactured goods, including military equipment.

Available information on countertrade business in member countries is incomplete, especially in instances where official guidelines or regulations do not exist and thus a restriction as such is not involved. Among the industrial countries, Australia and Canada have passed legislation under which countertrade arrangements are mandatory for certain defense-related procurements by the public sector. Developing countries that have engaged in countertrade arrangements involving mandatory offset requirements for enterprises in the public sector include Indonesia, Israel, and Uruguay. A number of other developing countries, such as Argentina, Colombia, Egypt, Greece, Guyana, the Islamic Republic of Iran, Jamaica, Malaysia, and Peru, have passed official legislation permitting public sector enterprises and/or private sector firms to engage in countertrade arrangements but not making it mandatory.

In many developing countries, private firms and/or public sector entities have entered into countertrade arrangements, although these types of arrangements have not been regulated. For instance, Algeria, Bangladesh, Brazil, Chile, the People’s Republic of China, Costa Rica, Ghana, Guinea, India, Iraq, Israel, Korea, Kuwait, the Socialist People’s Libyan Arab Jamahiriya, Mexico, Nigeria, Pakistan, Singapore, South Africa, Sudan, Suriname, Tanzania, Thailand, Turkey, Uganda, Venezuela, Viet Nam, Zambia, and Zimbabwe have concluded countertrade arrangements with private firms in some of the countries within this group, as well as with those in the industrial countries and centrally planned Eastern European countries; the aim is to promote trade in primary products (including crude oil) and manufactured goods, and in some instances, to service external debt. Formal official requirements for private sector participation in countertrade giving rise to exchange or trade restrictions are known to exist in only one or two developing countries. However, informal requirements, including administrative guidance and ad hoc conditions for issuance of import licenses, are reportedly widespread. Where countertrade practices involve a direct governmental limitation on the use or availability of exchange as such, they entail exchange restrictions subject to the Fund’s jurisdiction under Article VIII or Article XIV of the Fund’s Articles of Agreement.15

The emergence and growth of countertrade since the late 1970s may be attributed to several factors. Balance of payments difficulties and the scarcity of foreign exchange have led a number of developing countries to seek new financing techniques for trade and servicing of external debt. For example, arrangements have been made by Peru to service its foreign debt by using specified commodities. The pressures to find markets for surplus goods and the difficulties experienced in gaining access to the markets of the industrial countries for certain primary and manufactured products have also prompted these countries to enter into countertrade arrangements that commit industrial country exporters to purchasing a given quantity of products over a specified period. In certain cases, countertrade in the form of buy-back arrangements is seen—by both industrial and the more advanced developing countries—as a means of securing reliable sources of essential raw materials while exporting equipment and technology that have become outdated at home.

Capital Controls

A further liberalization of capital controls has been observed among industrial and developing countries during 1987. In industrial countries the modifications affected, inter alia, regulations governing foreign currency working balances, long-term financial investments, personal transfers, and foreign borrowing. Some major restrictions still remain, however, in a number of industrialized countries. These include prohibitions of short-term investments in foreign currency or abroad, restrictions on the transfer of funds across borders, limitations on the holding and exchange of foreign currencies, limitations of forward exchange trading, and requirements to repatriate foreign currency earnings from abroad. The liberalization of capital markets of European Economic Community (EEC) member countries envisaged by 1992 is expected to advance the process of eliminating remaining impediments to a free functioning of international capital markets as far as industrialized countries are concerned.

In developing countries the experience with capital controls was also, on balance, in favor of greater freedom. Liberalization occurred particularly in the areas of foreign currency accounts and investment capital flows. Measures affecting investment capital flows were in some instances related to the incorporation of debt-equity conversion schemes in debt restructurings. Tightening affected mainly the trading and holding of foreign exchange by residents and capital outflows.

Regulations concerning international transactions of commercial banks were changed in four industrial countries and Brazil. In Sweden all foreign exchange transactions were permitted through authorized banks. In Spain limitations on banks’ foreign currency working balances were relaxed. Finland eased restrictions on foreign loans with maturities of five years or more. Japan granted limited access to financial futures trading abroad. And in Brazil the central bank established a short-term line of credit in foreign currency for domestic commercial banks.

Regulations relating to domestic foreign currency accounts were eased in France and Poland, and in Brazil, El Salvador, the Philippines, and Zaïre. In France and Sweden permission was also granted to nonbanks to maintain accounts abroad under certain conditions. Individual transfers and the use of blocked funds were liberalized in Ireland and Zimbabwe. Spain, on the other hand, prohibited payments of interest on some convertible peseta accounts; Peru prohibited the holding of foreign currency-denominated bank balances; Bangladesh ordered conversion into local currency of interest accrued on some foreign currency accounts; and Egypt tightened restrictions on transfers between foreign currency accounts and took steps to close the previously illegal but officially tolerated nonbank foreign exchange market by arresting a large number of street dealers. In Italy maximum holding periods for funds credited to foreign exchange accounts were reduced.

In the area of portfolio investment, several industrialized countries eased restrictions pertaining to the inflow and outflow of capital. France, Spain, and Sweden allowed easier access to foreign borrowing by residents. Norway permitted foreigners to purchase domestic bonds, and Italy and Ireland relaxed restrictions on portfolio investments abroad by residents. Spain permitted some international organizations to borrow in the domestic capital market, but tightened rules regarding investments in domestic short-term titles by nonresidents. Among the developing countries, Greece expanded the right for residential companies to borrow abroad, and Malaysia expanded the rights of residents to borrow in foreign currencies and relaxed restrictions on domestic borrowing by foreigners, whereas Fiji suspended overseas investments and other forms of capital exports by residents.

Foreign direct investment by nonresidents was encouraged in a number of developing countries that relaxed corresponding regulations or offered special incentives. Six countries (Argentina, Brazil, Chile, Jamaica, the Philippines, and Venezuela) introduced or extended debt-equity conversion programs, and Zambia introduced a similar program aimed specifically at the reduction of external payment arrears. From a regulatory point of view, these programs do not always constitute a liberalization of capital controls. Countries tend to give incentives for direct investments under debt-equity swap schemes; they may also waive some specific regulations otherwise applied to such investment. On the other hand, most of these schemes are burdened with a host of restrictions that are more stringent than those applying to other foreign direct investment in the same country. They limit particularly the nature of investments permitted, profit remittances, and capital repatriation. Korea engaged in a substantial program of liberalization by opening manufacturing sectors to foreign investment, raising limits on overseas investment exempted from prior governmental approval and screening, reducing tax privileges for foreign companies and relaxing after-investment controls, and easing restrictions on the purchase of foreign real estate by Korean companies.

Other actions affecting direct investment by nonresidents or investment abroad by residents include Spain’s liberalization of investments abroad by residents and direct investments in the domestic market by nonresidents. Sweden liberalized residents’ purchases of property abroad. By contrast, Australia subjected real estate investment by nonresidents to approval, and Norway prohibited the granting of loans, credits, or guarantees to and investments in South Africa and Namibia. Ecuador simplified the regulations governing foreign direct investment and, in August, suspended temporarily the debt-equity conversion scheme that had been introduced at the end of 1986. Fiji tightened controls on outward capital flows, whereas Korea liberalized such transactions. Peru introduced an exchange premium for the conversion of private foreign capital into local currency for direct investment in specified sectors.

Gold

Continuing the trend of recent years, very few countries introduced changes in regulations affecting transactions in gold. Colombia modified the formula applied to calculate the price paid for gold purchases to include a 3 percent premium to compensate miners for costs incurred by taxes instituted in 1986. Suriname reduced the purchase price for locally produced gold by one third, and Costa Rica authorized the sale of unrefined gold by the Central Bank.

IV. Main Developments in Regional Arrangements

Foreign Ministers from the Association of South East Asian Nations (ASEAN)16 and the European Communities (EC)17 held their annual meeting in Singapore on June 18-20. The meeting discussed the regional view of negotiations within the General Agreement on Tariffs and Trade (GATT) and the United Nations Conference on Trade and Development (UNCTAD). Issues included a proposed EC oils and fats tax and intellectual property rights. Other topics discussed were investment promotion between EC and ASEAN enterprises, progress made in the establishment of joint investment committees in ASEAN capitals, and projects in human resources development, science and technology, and industry.

Heads of government from the six countries forming ASEAN met in December for the first time in ten years. Economic cooperation with a view to increasing the quantity and quality of intra-ASEAN trade was the central theme of discussion.

During a special press conference given in Moscow on May 18, the Secretary of the Council of Mutual Economic Assistance (CMEA)18 called for the establishment of official relations between the EC and CMEA.

Establishment of an EC delegation in Oslo was approved by the European Commission, and progress in various areas of cooperation between the EC and the European Free Trade Association (EFTA)19 since the two parties signed their Free Trade Agreement was reviewed at the annual high-level meeting in Oslo on June 1-2. An update on progress made toward completion of the EC’s internal market, including a plan for reform, was also presented at that meeting, and there was a review of EC-EFTA relations since the Luxembourg declaration of political cooperation of 1984. The first two conventions of that declaration were signed by the EC and EFTA on May 20, indicating progress toward the creation of a single European economic and free trade zone. The conventions are designed to facilitate EC-EFTA and intra-EFTA trade by harmonizing customs documentation and transit procedures. The first convention creates a single administrative document for trade in goods, and the second provides for a common procedure for transit of goods for EC-EFTA trade and intra-EFTA trade. At the same meeting, agreement was reached on the need for further cooperation in dealing with counterfeit trade, indirect taxation, liberalization of capital movements, and the maintenance of a regular dialogue in the financial services sector. It was also agreed that transparency should be the first step in cooperation regarding liberalizing public procurement policies. On trade in goods, it was established that negotiations should take place on the elimination of quantitative export restrictions. The improvement of rules for trade in processed agricultural products within the context of the Free Trade Agreements reached between the EC and the individual EFTA countries, notably to increase their transparency, was also considered as a subject for possible cooperation.

The European Commission published a communication to the European Parliament in February outlining the requirements for an integrated internal market by 1992. Reference was also made to the need for reforms in the sectors of a common agricultural policy, Community structural funds, and the development of stable and guaranteed financial resources.

Spain and Portugal’s accession to the EC and the consequences for the Lomé Convention was the main topic on the agenda for the Council meeting between the EC and the African, Caribbean, and Pacific (ACP)20 States on May 14–15 in Brussels. Other items on the agenda were financial, technical, customs, and trade cooperation, agricultural commodities, and the implementation of Lomé III. The Ministers also discussed preparations for the seventh United Nations Conference on Trade and Development (UNCTAD 7), which took place in Geneva from July 9 to 31, 1987. The follow-up to the UN special session devoted to Africa’s critical social and economic situation was also discussed. Another topic was the conclusion of Spain and Portugal’s Accession Protocol to the Third Lomé Convention; transitional arrangements providing for the application of Lomé III to both countries and the definition of rules governing trade between ACP countries and Spain and Portugal expired on June 30.

The Economic Community of West African States (Ecowas)21 held its tenth summit in Abuja, Nigeria. The Ecowas Economic Recovery Program (ERP), launched at a special session of the summit, allocates funds to approved projects, most of which are regional in scope. The necessity to implement trade liberalization was addressed, and progress in developing transport and communications infrastructures, as well as the promotion of free movement of persons, goods, and services, was noted. A program calling for the creation of a common currency was endorsed at the meeting. The plan proposes the creation of a full monetary zone with convertible currency and pooled reserves, following a five-year transitional period.

Antigua and Barbuda and Botswana acceded to the General Agreement on Tariffs and Trade (GATT) in April and August, respectively, and Morocco became the ninety-fourth Contracting Party, with effect from June 17. Algeria, which is de facto a member of the GATT, has also announced its intention to become a Contracting Party.

Heads of state and government of the six member countries of the Gulf Cooperation Council (GCC) held their eighth annual summit in Riyadh in December. Among issues discussed was that of closer monetary coordination among the members with a view to the ultimate establishment of a common currency among the members. The establishment of a joint or common support fund was also recommended in order to ensure the stability of the exchange and price structure within the system. In addition, the possibility of setting up a multilateral lending facility was explored, in order to make available additional financing for currency support operations in emergency situations.

The International Chamber of Commerce (ICC)-UN-GATT Economic Consultative Committee met on March 23-24, 1987 in Paris. Topics discussed included macroeconomic policy coordination among the industrial countries and structural adjustment and the restoration of creditworthiness in the indebted developing countries.

On December 10, 1986 Argentina and Brazil, acting within the framework of the Latin American Integration Association (LAIA),22 signed an agreement liberalizing the exchange of capital goods between the two countries. The agreement preserves preferential treatment between the signatories, expands the category of capital goods already included in exchange liberalization agreements, and provides for a system of consultations between the two countries prior to the granting of tariff exemptions for imports of capital goods included in the so-called common list.

On December 21, 1987, the Third Biennial Report by Australia and New Zealand on the South Pacific Regional Trade and Economic Agreement (Sparteca)23 was submitted to the GATT. Sparteca provides duty-free and unrestricted access to the Australian and New Zealand markets for most products exported by the Forum Island Countries. Australia and New Zealand provide these concessions on a nonreciprocal basis. The South Pacific Bureau for Economic Cooperation is responsible for overseeing the operation of Sparteca, and an annual review of the agreement is held at the Regional Committee on Trade meeting.

The Organization of American States (OAS)24 held the Fourth Policy, Programming, and Coordination Meeting for the Caribbean Subregion and Suriname from April 29 to May 3, 1987, in Basseterre, St. Kitts and Nevis. The meeting dealt with current development needs of the states of the region, the policies, mechanisms, and problems appropriate to their development, and the completion of the programming process for the countries for the 1988-89 biennium.

The Organization of Africa Unity (OAU)25 held its summit in Addis Ababa in July. Participants reiterated that an international conference was the most appropriate means for international creditors and African borrowers to seek a solution to the problem of debt repayment. In preparation for such a conference, the permanent steering committee was given the task of formulating concrete proposals for a solution and for a common African position on the issue. Other proposals included the imposition of various sanctions against South Africa in the areas of commercial, academic, and cultural exchange. An extraordinary economic summit took place in Addis Ababa from November 30 to December 1, 1987 to devise a common strategy on debt.

The OAU and the Economic Commission for Africa held a conference in Abuja, Nigeria in June to appraise the progress in the implementation of the UN Program of Action for the African Priority Program for Economic Recovery (APPER), which was adopted at the UN Special Session in New York on June 1, 1986. African states were encouraged to reform and liberalize their economies and so attract new aid and investment.

The South African Development Coordination Conference (SADCC)26 group held its seventh annual summit in Botswana in February. The group discussed investment and production of goods in the region, with the aim of reversing a decline in the flow of nonconcessional resources.

Appendix I. Summary of Measures Affecting Members’ Exchange and Trade Systems, 1987
MemberDateDirectionMeasures
Imports and Import Payments
Quantitative Import Controls
Industrial countries
Canada1/1/87ExtensionBilateral textile and clothing arrangements to be in effect from 1/1/87 to 12/31/91, negotiated with certain countries.
1/1/87TighteningA one-year textile and clothing agreement concluded with Brazil.
3/31/87LiberalizationVoluntary export restraints with Japan on automobiles lapsed.
Japan12/31/87LiberalizationThe GSP offered to LDCs extended.
Norway3/20/87IntroductionImports from South Africa and Namibia prohibited.
Sweden10/1/87IntroductionImports from South Africa prohibited.
7/1/87LiberalizationImports of textile products from certain countries freed.
United States4/22/87ExtensionAgreement on textiles trade with Taiwan Province of China extended.
7/15/87IntroductionLimits imposed on import of clothing and textiles from China, the Dominican Republic, Mauritius, and Turkey.
10/9/87IntroductionEmbargo placed on imports from the Islamic Republic of Iran.
12/19/87TighteningAgreement on textile trade with China concluded.
12/30/87LiberalizationQuotas on steel imports from Mexico increased.
Developing countries—fuel exporters
Ecuador2/5/87LiberalizationNumber of prohibited items and items requiring prior authorizations reduced.
6/11/87LiberalizationQuantitative restrictions on certain imports, mainly agricultural products, abolished.
Indonesia1/15/87LiberalizationImport permits for certain products in the textile category and in the manufactured steel category granted.
Iraq5/11/87LiberalizationPrivate sector importers allowed to import raw materials and capital equipment directly from suppliers abroad, providing payments made from their foreign exchange holdings abroad.
Tunisia2/20/87LiberalizationCoverage of unrestricted importation extended to enterprises exporting 15 percent of output; most remaining raw materials and spare parts transferred to import certificate system.
6/87LiberalizationCoverage of unrestricted importation extended to enterprises exporting items less than 15 percent of output for imports up to the value of their exports.
Developing countries—other
Argentina3/4/87LiberalizationItems added to temporary admission regime.
3/26/87LiberalizationInputs for petroleum industry and 500 other items transferred to automatic list.
10/14/87LiberalizationItems added to temporary admission regime.
10/21/87LiberalizationPaper and paper products excluded from prior authorization requirement.
12/20/87LiberalizationChemical and petrochemical products excluded from prior authorization requirement.
12/21/87LiberalizationProducers of goods used in export production given access to temporary admission regime.
Bangladesh7/14/87LiberalizationCertain items on negative and restricted import lists deleted.
7/14/87LiberalizationLimits on industrial firms’ imports of restricted goods doubled.
Brazil1/16/87TighteningA number of items transferred to prohibited import list.
9/1/87LiberalizationImport prohibitions lifted for certain products.
Central African Republic1/87LiberalizationImport license and quotas abolished.
China, People’s Republic of2/87TighteningCivil aircraft added to list of products requiring import licenses.
3/87TighteningPlywood and cyanide sodium added to list of products requiring import licenses.
10/87TighteningSoft drinks added to list of products requiring import licenses.
5/87TighteningWood pulp added to list of products requiring import licenses.
Colombia1/7/87TighteningCertain goods transferred from free to prior license list.
2/12/87LiberalizationPolicy established to facilitate imports of jeeps.
6/3/87LiberalizationCertain goods transferred from prior license to free list.
6/3/87IntroductionPetroleum imports subjected to prior approval.
9/3/87LiberalizationCertain goods moved from prior license to free list.
Dominican Republic6/17/87IntroductionPrior central bank approval required for import payments, with nonessential imports effectively prohibited.
11/12/87EliminationRequirement of prior central bank approval for import payments eliminated.
Ghana5/8/87LiberalizationList of products eligible for “A” licenses expanded.
Grenada3/1/87TighteningCandles put on negative list.
Guinea-Bissau5/4/87LiberalizationImport licenses automatically issued for a list of goods, excluding petroleum, covering about 50 percent of commercial imports.
Haiti2/15/87LiberalizationNumber of items subject to import licenses reduced from 35 to 7.
Honduras11/11/87LiberalizationLimits on imports not requiring imports permits and prior authorization increased.
India10/9/87LiberalizationExporters of cotton yarn allowed to import raw cotton.
Israel9/17/87IntroductionImports of iron and steel products and gold coins from South Africa prohibited.
Liberia5/87IntroductionMining, logging, and rubber companies no longer eligible to import petroleum for their own use.
Korea7/1/87LiberalizationA total of 167 items removed from the restricted import list, and 3 items added; 47 items removed from the import surveillance list.
9/1/87LiberalizationThree more items removed from the import surveillance list, two items added.
Madagascar1/2/87LiberalizationA bidding system for import licenses introduced.
7/1/87LiberalizationAmount of foreign exchange allocated to import license bidding increased. Application fee lowered from 10 percent to 5 percent.
9/1/87LiberalizationAmount of foreign exchange allocated to import license bidding increased.
Maldives3/1/87LiberalizationFinancing requirement through the banking system for the issuance of import licenses abolished.
Nepal1/28/87LiberalizationThree items added to OGL system.
5/5/87LiberalizationOGL system extended to 26 items.
Netherlands Antilles10/14/87TighteningImport quotas for 1987 established.
10/14/87TighteningList of items subject to quotas expanded.
Niger11/1/87LiberalizationQuantitative restrictions on imports on cement and rice abolished.
Pakistan7/1/87LiberalizationDuty-free cotton yarn imports allowed.
Peru6/1/87LiberalizationLimit on automatic approval for capital goods imports for export industries increased to US$3,000 a transaction and to US$30,000 a year.
Philippines1/9/87LiberalizationSchedules for liberalization of certain goods (in particular certain agricultural and food products, polyester fiber, textile yarns and thread, certain synthetics, and paper and paper products) in 1987 and by end-April 1988 announced.
2/10/87LiberalizationImports of corn liberalized.
7/1/87LiberalizationPrior approval not required for importation of certain iron and steel, plastic, paper, and tobacco products.
7/29/87LiberalizationImport liberalization schedules for certain paper and iron and steel products accelerated.
11/5/87LiberalizationPrior approval not required for imports of polyester fibers, textile yarns, and threads.
12/4/87TighteningImports of toluene subjected to prior approval.
12/24/87LiberalizationPrior approval not required for imports of paper, glass, iron, steel, and food products.
Senegal2/3/87EliminationQuantitative restrictions on certain raw materials and inputs used by food processing and office stationery industries eliminated.
5/27/87EliminationQuantitative restrictions on certain raw materials and inputs used by chemical and paper industries eliminated.
Sri Lanka11/18/87EliminationImport licensing for yarns, textiles, and clothing eliminated.
Thailand1/8/87ExtensionPermission to import soybean meal extended until 8/31/87.
4/2/87TighteningLicensing requirement imposed on imports of potatoes.
4/26/87ExtensionLicensing requirements for weaving machines, etc., extended for two years.
6/6/87TighteningLicensing requirement imposed on imports of motorcycle engines.
6/27/87TighteningLicensing requirements imposed on imports of high fructose syrup.
7/9/87LiberalizationPermission granted for the importation of a certain number of tractors.
Uganda11/13/87TighteningA form of OGL for imports by key industries introduced.
Western Samoa9/1/87LiberalizationCertain imports previously classified as “prohibited” reclassified as “restricted.”
9/1/87TighteningThree import items that could previously be imported freely classified as “restricted.”
Zambia8/4/87TighteningAll applications for export retention schemes and the “no-funds involved” import licenses required to be approved by the Bank of Zambia and “no-funds involved” import licenses restricted to imports of essential consumer goods, inputs, and machinery.
Import Surcharges and Import Taxation
Industrial countries
Australia2/13/87LiberalizationTariffs for lamp industry uniformly set at 15 percent.
9/13/87LiberalizationTariffs on certain pharmaceutical products reduced from 20 percent to 2-10 percent.
9/30/87LiberalizationTariffs on used and new engines reduced from 25 percent to 15 percent.
10/15/87LiberalizationAntidumping duties on c.i. pigment blue and tires for passenger cars imported from Korea removed.
Canada1/12/87IntroductionProvisional antidumping duties imposed on imports of yellow onions from the United States.
2/19/87EliminationTariff increases imposed on 6/6/86 on books, computer parts and semiconductors, and other products removed. General preferential tariff on most specialty and certain carbon steel mill products withdrawn.
2/20/87IntroductionDefinitive antidumping duties applied to drywall screws from Korea.
3/6/87IntroductionDefinitive countervailing duties imposed on grain corn from the United States. Provisional antidumping duties imposed on gasoline-powered chain saws from Germany, Sweden, and the United States.
3/12/87EliminationCountervailing duty proceedings regarding carbon steel seamless pipe from Brazil terminated and provisional duties collected refunded.
4/30/87IntroductionDefinitive antidumping duties imposed on yellow onions from the United States.
6/2/87IntroductionProvisional antidumping duties imposed on fertilizers from the United States.
6/30/87IntroductionProvisional antidumping duties imposed on printing plates from Japan and the United States.
8/20/87IntroductionProvisional antidumping duties imposed on carbon steel reinforcing bars from Mexico and the United States.
9/2/87IntroductionProvisional antidumping and countervailing duties imposed on drywall screws from France.
10/28/87IntroductionDefinitive antidumping duties imposed on photo albums with pockets from several countries.
11/3/87IntroductionDefinitive antidumping duties imposed on photo albums with self-adhesive leaves from several countries.
11/19/87LiberalizationGeneral preferential tariff on spandex yarns withdrawn until 10/31/90.
11/24/87IntroductionProvisional antidumping duties imposed on passenger cars from Korea.
11/25/87IntroductionProvisional antidumping duties imposed on recreational vehicle doors from the United States.
Japan4/1/87LiberalizationTariffs on 33 mineral products, 2 food products, cigarettes, and certain wood products removed; and tariffs on aluminum reduced.
11/24/87LiberalizationTariff on some 30 industrial items reduced.
New Zealand7/1/87LiberalizationCertain import tariffs reduced.
Switzerland1/1/87LiberalizationFinal tariff cuts under Tokyo round implemented.
10/1/87IntroductionTax on sugar imports levied.
United States1/9/87IntroductionAntidumping and countervailing duties imposed on stainless steel cooking ware imports from Korea and Taiwan Province of China
1/27/87IntroductionAntidumping duties imposed on butt-weld fittings from Japan.
2/19/87IntroductionAntidumping duties imposed on brass sheet and strip from France, Germany, Italy, and Sweden.
2/20/87IntroductionAntidumping and countervailing duties imposed on certain imports from Israel.
3/5/87IntroductionAntidumping and countervailing duties imposed on fresh-cut flowers from Canada, Chile, Colombia, Costa Rica, Ecuador, and the Netherlands.
4/17/87IntroductionRetaliation duties of 100 percent imposed on certain goods from Japan.
4/22/87IntroductionAntidumping duties imposed on orange juice from Brazil.
4/27/87IntroductionAntidumping duties imposed on disc wheels from Brazil.
6/15/87IntroductionAntidumping duties imposed on cast-iron fittings from Japan.
7/1/87IntroductionAntidumping duties imposed on urea from the German Democratic Republic, Romania, and the U.S.S.R.
8/5/87IntroductionAntidumping duties imposed on tempered roller bearings from Italy and Yugoslavia.
8/12/87IntroductionAntidumping duties imposed on certain goods from Belgium (phosphoric acid) and Thailand (pipe fittings).
8/12/87IntroductionAntidumping and countervailing duties imposed on phosphoric acid from Israel.
9/1/87LiberalizationCustoms duties on certain imports from Israel lowered.
9/3/87LiberalizationTariffs on pasta lowered.
9/4/87IntroductionAntidumping duties imposed on filament fabric from Japan.
9/9/87LiberalizationSurcharge on heavy motorcycles eliminated.
9/16/87IntroductionAntidumping duties imposed on tapered roller bearings from Japan.
11/18/87IntroductionAntidumping duties imposed on stainless steel hollow goods from Sweden.
12/22/87IntroductionAntidumping duties imposed on colored picture tubes from Canada, Japan, Korea, and Singapore.
Developing countries—fuel exporters
Congo, People’s Republic of4/1/87TighteningIncrease in additional tax rate on imports of certain specified products.
Ecuador1/4/87LiberalizationDuty-free imports of inputs used for export production extended to additional items.
Indonesia12/24/87LiberalizationTariff rates on some 65 items reduced.
12/24/87TighteningTariff rates on some 91 items raised, and specific import duties imposed on certain food products.
Kuwait5/22/87TighteningTariffs on certain iron and steel building materials reinstated.
Oman4/1/87TighteningCustom tariff on cement increased.
Trinidad and Tobago1/23/87LiberalizationStamp duty of 12 percent on books and newsprint abolished.
Developing countries—other
Antigua and Barbuda7/87TighteningCustoms tariff of 30 percent levied on meat.
Argentina10/16/87TighteningAdditional import surcharge of 5 percent introduced through December 1988.
Bangladesh7/1/87TighteningDevelopment surcharge on dutiable imports raised.
7/1/87LiberalizationImport duties on luxury items, and items pertaining to steel, engineering, textile, and chemical sectors reduced.
Benin2/29/87LiberalizationTariffs on selected imports reduced.
4/17/87IntroductionTax on import licenses introduced.
Bolivia7/10/87LiberalizationInterest-free deferment over three years of the customs duty on capital goods.
7/10/87TighteningPreferential tariff rate of 2 percent for import of the State Petroleum Company (YPFB) replaced by the uniform 20 percent rate applying to most imports.
Brazil1/28/87LiberalizationIOF tax on selected imports from Argentina reduced to zero.
2/11/87LiberalizationImport tariffs and nontariff barriers on the importation of selected capital goods from Argentina eliminated.
3/11/87LiberalizationIOF tax on imports of crude petroleum by Petrobras reduced to zero.
3/26/87LiberalizationIOF tax on imports of milk and butter disembarked before December 31, 1987 reduced to zero.
3/30/87LiberalizationProducers of manufactured goods entitled to exemptions from import tax on intermediate and capital goods valued at more than 10 percent of growth of company’s exports over 1986.
6/2/87LiberalizationIOF on imports of selected chemical products disembarked during January-July 1987 reduced to zero.
7/24/87LiberalizationTariffs on certain products reduced.
9/28/87LiberalizationTariffs on certain products reduced.
Burkina Faso2/2/87TighteningIncrease in statistical tax from 3 percent to 4 percent.
Chad1/1/87LiberalizationBy 1990, 80 percent of tariffs will be reduced and 20 percent increased, as a result of re-entry into Central African Customs and Economic Union.
China, People’s Republic of7/1/87TighteningImport duty on certain kinds of varnishes and lacquers raised to 60 percent; on color film, to 70 percent; and on certain kinds of watches, to 80 percent.
7/1/87LiberalizationDuty rates on copper, lead, and zinc waste and scrap reduced to 6-15 percent.
10/87TighteningImport duty on certain soft drinks raised to 90 percent.
Colombia9/4/87EliminationMilitary imports exempted from import duties and taxes.
11/23/87LiberalizationImport tariffs on capital goods reduced.
Costa Rica1/1/87LiberalizationSurcharges on consumer goods eliminated.
10/1/87IntroductionSurcharges on inputs and capital goods introduced.
Côte d’Ivoire8/11/87TighteningImport duties on specified products increased as a temporary measure.
Dominica7/1/87EliminationStamp duty on imports abolished.
7/1/87LiberalizationCustoms service charges unified.
Dominican Republic1/19/87IntroductionExchange commission of 2 percent imposed on sales of foreign exchange for imports.
5/30/87TighteningExchange commission on sales of foreign exchange for imports raised to 5 percent.
11/12/87TighteningExchange commission on sales of foreign exchange for imports raised to 20 percent.
Greece3/1/87LiberalizationRegulatory tax on imports reduced by 20 percent.
Guatemala10/1/87TighteningTax on imports introduced, with exceptions.
Haiti2/10/87LiberalizationAll specific tariffs replaced by ad valorem tariffs.
12/31/87EliminationTransitional tariff arrangements for domestic industries terminated.
Hungary11/1/87TighteningCustoms clearance fee increased from 2 percent to 4 percent, and the statistical fee, from 3 percent to 5 percent.
India3/1/87TighteningCustoms duties on items used by manufacturers of capital equipment and electronics adjusted.
9/20/87TighteningCustoms duties on a range of metal products increased.
Israel1/1/87LiberalizationCustoms duties on certain imports from the EC and the United States lowered.
Korea1/1/87TighteningTariff rate on crude oil raised from 15 percent to 24.5 percent, and average unweighted basic tariff rate reduced from 19.9 percent to 19.3 percent.
7/1/87LiberalizationTariff cuts on a large number of items.
10/1/87LiberalizationTariff rate on crude oil reduced from 24.5 percent to 10 percent.
Malawi4/1/87TighteningSelected import duties on nonessential and luxury goods increased, and the maximum import duty rate raised from 45 percent to 75 percent. Uplift factor of 1.2 applied to the c.i.f. value of imports (inclusive of import duties) for domestic surtax assessment purposes eliminated, and maximum surtax rate on imports, raised from 30 percent to 35 percent.
7/20/87TighteningImport levy raised from 5 percent to 10 percent, and import surcharge on cars introduced.
Mauritius5/2/87LiberalizationMaximum tariff rate reduced to 127 percent, inclusive of stamp duties.
Nicaragua6/6/87TighteningExchange tax applied to imports of nonessential consumer and capital goods used in nonagricultural sector.
6/6/87TighteningExchange tax applied to imports of spare parts and capital goods used in agricultural sector.
Niger11/1/87TighteningTax on rice imports raised.
11/1/87IntroductionTax on cement imports introduced.
Pakistan7/1/87TighteningImport license fee increased from 2 percent to 4 percent.
Papua New Guinea1/87LiberalizationTariff structure simplified and general import levy abolished.
Sierra Leone7/1/87TighteningA wide range of import taxes revised upward.
South Africa6/3/87EliminationImport surcharge on raw material inputs eliminated.
Sri Lanka8/87LiberalizationImport duties on certain motor vehicles reduced.
11/18/87LiberalizationMaximum tariff rate reduced from 100 percent to 60 percent, with certain exceptions.
11/18/87IntroductionMinimum tariff rate of 5 percent introduced, with certain exceptions.
Sudan10/3/87LiberalizationTariff rates on certain products adjusted, resulting in lower average rate.
Thailand2/6/87LiberalizationImport duties reduced on a number of items.
Turkey10/18/87TighteningRate of import levies raised.
Uruguay8/26/87LiberalizationCombined effective tariff rates reduced.
9/3/87LiberalizationOfficial reference prices for textile imports lowered by 10 percent.
EEC countries
2/5/87IntroductionDefinitive antidumping duties imposed on housed bearing units manufactured by certain firms in Japan.
2/23/87IntroductionDefinitive antidumping duties imposed on plain paper photocopiers manufactured by certain firms in Japan.
2/23/87EliminationDefinitive antidumping duties on electronic typewriters manufactured by certain firms in Japan eliminated.
3/23/87IntroductionDefinitive antidumping duties imposed on standardized multiphase electric motors with an output of between 0.75 kw and 75 kw originating in Hungary and Poland (and certain other eastern European countries).
3/27/87IntroductionDefinitive antidumping duties imposed on imports of certain electric motors from Bulgaria, Czechoslovakia, the German Democratic Republic, Hungary, Poland, and the U.S.S.R.
5/9/87IntroductionProvisional antidumping duties imposed on urea originating in Kuwait, Libyan Arab Jamahiriya, Trinidad and Tobago, and Yugoslavia.
5/11/87IntroductionDefinitive antidumping duties imposed on outboard motors manufactured by certain firms in Japan.
7/23/87EliminationDefinitive antidumping duties on urea and ammonium nitrate in liquid solution manufactured by certain firms in the United States eliminated.
7/31/87IntroductionDefinitive antidumping duties imposed on vinyl acetate monomer manufactured by certain firms in the United States.
8/5/87IntroductionDefinitive antidumping duties imposed on standardized multiphase electric motors with an output of between 0.75 kw and 75 kw originating in Yugoslavia.
8/20/87IntroductionDefinitive antidumping duties imposed on imports of copper sulphate from Czechoslovakia and Hungary (Regulation No. 2512/87).
9/4/87EliminationDefinitive antidumping duties on styrene monomer originating in the United States eliminated.
9/7/87IntroductionCountervailing charge imposed on fresh lemons originating in Uruguay.
9/10/87IntroductionCountervailing charge imposed on table grapes originating in Cyprus.
9/18/87EliminationCountervailing charge on table grapes originating in Cyprus eliminated.
9/29/87IntroductionDefinitive antidumping duties imposed on imports of vinyl acetate monomer from Canada.
10/5/87IntroductionCountervailing charge imposed on cucumbers originating in Poland.
11/7/87IntroductionDefinitive antidumping duties imposed on imports of urea fertilizer from Libyan Arab Jamahiriya and Saudi Arabia (Regulation No. 3339/87).
11/12/87IntroductionDefinitive antidumping duties imposed on imports of ferro silico calcium from Brazil.
11/21/87IntroductionDefinitive antidumping duties imposed on imports of certain iron and steel sheets and plates from Mexico (Regulation No. 3499/87).
11/26/87IntroductionDefinitive antidumping duties imposed on imports of certain ball bearings from Japan (Regulation No. 3528/87).
Advance Import Deposits
Developing countries—fuel exporters
Ecuador10/21/87IntroductionPrior import deposit requirements introduced.
Syrian Arab Republic6/2/87LiberalizationOwners of industrial plants and workshops allowed to import equipment, spare parts, and raw materials without prior import deposits.
6/2/87LiberalizationPrivate importers allowed to import some agricultural equipment, spare parts, and raw materials without prior import deposits.
6/19/87LiberalizationPrivate importers allowed to import all types of animal feed not produced domestically without prior import deposits.
Developing countries—other
Bangladesh8/27/87LiberalizationForeign exchange deposit requirement for industrial raw materials imports reduced.
Egypt5/10/87LiberalizationPrior import deposits in foreign exchange on private sector imports eliminated.
5/10/87

and

5/11/87
IntroductionDeposit requirement introduced of at least 35 percent in domestic currency or foreign exchange on private sector imports (including Law 43 companies) when opening of a letter of credit requested. Payment in full in domestic currency or foreign exchange (cash or through suppliers’ credits) required when letter of credit opened.
5/11/87LiberalizationFull amount of prior import deposits in domestic currency permitted.
Greece2/1/87LiberalizationAdvance import deposit rates halved.
5/1/87LiberalizationAdvance import deposit scheme abolished.
Guinea1/21/87IntroductionAdvance deposits introduced for certain imports.
5/8/87EliminationAdvance deposits for certain imports eliminated.
Israel1/1/87LiberalizationAdvance import deposits reduced.
Philippines2/27/87LiberalizationMargin deposit requirement on import letters of credit reduced from 100 percent to 50 percent.
4/10/87TighteningMargin deposit requirement on import letters of credit raised from 50 percent to 100 percent.
Western Samoa3/9/87EliminationAdvance deposit requirement on imports of motor vehicles eliminated.
Other Import Measures
Industrial countries
Belgium and Luxembourg1/1/87LiberalizationReporting procedures simplified.
Canada7/7/87TighteningPrice undertakings accepted from German and Japanese exporters with regard to porcelain station port insulators.
France3/31/87LiberalizationRequirement to secure 80 percent of imports of refined oil products from EC refineries abolished and licensing requirements liberalized.
4/20/87LiberalizationLicensing requirements for imports of refined oil products from the EC abolished.
Italy4/29/87TighteningAuthorization granted by EC Commission not to apply principle of free movement of goods within the EC to imports of woven cotton fabrics from Czechoslovakia until 12/31/87.
5/13/87EliminationCompulsory foreign financing of advanced payments for imports of goods and services abolished.
6/5/87TighteningAuthorization granted by EC Commission not to apply the principle of free movement of goods within the EC to imports of woven fabrics of silk from China until 12/31/87.
7/1/87TighteningAuthorization granted by EC Commission not to apply Community treatment of fresh bananas originating in certain third world countries until 1/31/88.
9/13/87TighteningImport payments before expiration of contractual terms and repayments of foreign currency trade credits ahead of maturity prohibited.
9/13/87TighteningCompulsory foreign financing of goods and services reintroduced.
Japan9/30/87LiberalizationInternational standards for import of 47 electrical appliances adopted.
United States2/12/87LiberalizationMost-favored-nation status for Poland restored.
8/5/87IntroductionOrderly marketing agreement with China on certain chemicals (Section 406 of the 1974 Trade Act) concluded.
Developing countries—fuel exporters
Indonesia1/25/87TighteningRequirement for importers of cotton to purchase domestically produced cotton at a specified ratio relative to imported cotton imposed.
Iraq5/11/87LiberalizationPrivate sector importers allowed to import raw materials and capital equipment directly from suppliers abroad, provided payments made from their own foreign exchange holdings abroad.
Venezuela1/1/87-

4/30/87
LiberalizationAdvances given by central bank on presentation of import permit.
1/1/87-

6/30/87
LiberalizationNew import control system put in place, under which most annual foreign exchange budget among trade associations and individual firms allocated at beginning of each year.
7/8/87LiberalizationPreferential treatment for basic import needs of exporting firms introduced.
7/30/87TighteningForeign exchange cost of letters of credit made eligible to obtain exchange rates applicable to respective imports.
7/87LiberalizationSeparate foreign exchange budget for meeting import needs of private exporters created.
Developing countries—other
China, People’s Republic of10/87TighteningForeign investment companies permitted to sell certain import substitutes to local market.
Egypt5/10/87LiberalizationPrivate sector imports (including those by Law 43 companies) permitted to be effected through new bank market. Specified public and private sector export receipts transferred to new bank market.
6/9/87LiberalizationUse of foreign exchange obtained in new bank market permitted to settle all bills of lading dated prior to June 9, 1987.
8/2/87LiberalizationUse of foreign exchange obtained in new bank market to settle bills of lading for credit opened prior to May 11, 1987 permitted, whether or not predated or postdated June 9, 1987.
8/18/87LiberalizationUse of up to 25 percent of balances in export retention accounts permitted to finance trade expenses and invisible payments when related to account holder’s activity and for settlement of repatriation requirements.
9/15/87TighteningFunds in export retention accounts required to be fully utilized before authorized payments for imports (public and private sectors) can be effected through new bank market.
9/15/87LiberalizationUse of balances in export retention accounts permitted to finance imports of spare parts without opening letters of credit, provided appropriate use duly certified.
Fiji6/17/87TighteningAuthorized banks required to report all sales of foreign exchange for import payments.
Guinea1/1/87LiberalizationAll import and invisible payments made eligible to purchase foreign exchange at auctions, except for limitations placed on purchases for tourist travel and transfer abroad of salaries by expatriate workers.
1/21/87IntroductionRequirement for phased settlement of import for which foreign exchange is obtained in the auction market.
Guinea-Bissau5/4/87LiberalizationPrivate sector importers with valid import licenses permitted to provide foreign exchange freely to finance imports.
Niger11/1/87LiberalizationRestrictions on number of traders authorized to import rice abolished.
Peru1/14/87IntroductionMinimum financing requirement of 180 days for capital goods imports introduced.
Portugal7/1/87LiberalizationRequirement on foreign financing for imports of cereals abolished.
9/30/87LiberalizationRequirement on foreign financing for imports of petroleum abolished.
Sierra Leone12/1/87TighteningAll unnumbered licenses suspended.
Sudan8/9/87LiberalizationImports of certain products through use of importers’ own foreign exchange allowed.
Thailand3/5/87LiberalizationRequired percentage of domestic purchases of silk yarn relative to import value reduced.
4/8/87LiberalizationRequired ratio of local purchases of soybean meal to imports eased.
5/1/87LiberalizationRequired percentage of domestic purchases of silk yarn relative to import value reduced.
Zaïre6/1/87Liberalization(1) Prior approval from Bank of Zaïre lifted for various categories of imports; and (2) limit on imports for which importers are not required to submit OZAC verification certificates to their banks raised from SDR 1,000 to SDR 5,000.
EEC countries
9/18/87IntroductionSpain authorized to apply, until December 31, 1988, intra-Community surveillance to imports of certain textile products originating in certain third countries.
Exports and Export Proceeds
Quantitative Control on Exports
Industrial countries
Australia9/15/87TighteningQuota on meat exports to the United States for 1987 announced in compliance with a request from the United States.
Japan1/1/87IntroductionVoluntary export restraints introduced on machine tool exports to the United States.
4/1/87IntroductionVoluntary export restraints and floor prices introduced on exports of forklift trucks to the EC.
4/1/87ExtensionVoluntary export restraints on exports of cars to the United States extended to March 1988.
New Zealand11/87IntroductionVoluntary export restraints on meat agreed with the United States.
Norway3/20/87IntroductionExport to South Africa and Namibia prohibited.
Sweden10/1/87TighteningExports to South Africa prohibited.
Developing countries—other
Ethiopia9/12/87TighteningExports of hides and skins restricted.
India3/87TighteningExport of frogs’ legs banned.
8/87ExtensionSuspenion of raw cotton exports extended.
Israel3/18/87IntroductionNew defense contracts with South Africa prohibited.
9/17/87IntroductionOil exports and all re-exports to South Africa prohibited.
Korea7/1/87TighteningExport of ten items subjected to voluntary export restraints.
Lao People’s Democratic Republic10/19/87TighteningExports of unprocessed gnarled wood banned.
Pakistan7/1/87TighteningQuotas imposed on cotton yarn exports.
8/4/87LiberalizationRe-export of imported goods allowed, subject to certain conditions.
9/9/87LiberalizationExport of cotton by registered private sector exporters allowed, subject to certain conditions.
Sri Lanka8/1/87LiberalizationExports of rough geuda corundum to Thailand allowed.
9/10/87LiberalizationValue of gifts of domestic produce and commercial samples that can be sent abroad increased.
Sudan2/7/87LiberalizationExports ban on sorghum lifted.
Uruguay11/17/87LiberalizationExports of live sheep permitted.
Export Licensing
Industrial countries
United States1/15/87EliminationRestrictions on exports of oil and gas equipment to the U.S.S.R. lifted.
2/9/87LiberalizationLicensing procedures relaxed.
3/17/87LiberalizationExport controls on wafering saws to certain countries removed.
6/18/87ExtensionControls on exports to the Syrian Arab Republic extended to new items.
10/20/87TighteningControl on exports to the Islamic Republic of Iran expanded.
Developing countries—other
Honduras11/11/87LiberalizationScope of export licensing requirements reduced.
Sierra Leone11/3/87TighteningAll private export licensing for gold and diamonds suspended. Government Gold and Diamond Office and Bank of Sierra Leone became sole exporter for diamonds and gold, respectively.
Sri Lanka11/18/87EliminationExport licensing for certain nontraditional products eliminated.
Thailand2/27/87LiberalizationLicense fee reduced for exporters residing in border provinces.
4/3/87TighteningLicensing required on exports of live black tiger shrimp.
Fiscal and Other Incentives
Industrial countries
New Zealand3/31/87EliminationExport performance taxation incentive abolished.
Developing countries—fuel exporters
Venezuela7/8/87ExtensionExport incentives raised.
Developing countries—other
Argentina10/14/87ExtensionCertain agro-industrial exports included in rebate scheme for indirect taxes.
Bolivia7/10/87IntroductionRebate equivalent to 5 percent of f.o.b. value of traditional exports and 10 percent of nontraditional exports offered foreign exchange surrender.
Chile10/3/87TighteningScope of export subsidy scheme expanded for small exporters from 10 percent of f.o.b. value of exports up to US$7.5 million to 10 percent of f.o.b. value up to US$8.2 million and 5 percent of f.o.b. value between US$8.2 and US$12 million.
Côte d’Ivoire11/30/87TighteningScope of export premium payment scheme expanded to certain manufacturing industries and agricultural products.
Greece4/1/87LiberalizationExport subsidies reduced.
Guyana1/1/87LiberalizationExport subsidies reduced.
Jamaica2/2/87IntroductionAn export rebate of 7.5 percent on f.o.b. value introduced for manufactured goods exported to non-Caricom countries, with certain exceptions.
Pakistan7/1/87LiberalizationDrawbacks of import duty and sales tax exporters pay on raw materials extended to Iqra surcharge (5 percent), import surcharge (5 percent), and import license fee (4 percent).
Sri Lanka11/18/87IntroductionFiscal incentives introduced for indirect exporters.
Turkey1/12/87EliminationPremium payments on cotton exports discontinued.
5/16/87TighteningPremium payments introduced for 29 additional export items.
Uruguay6/1/87LiberalizationRates of tax incentive payments for fish exporters reduced from 3-11 percent to 2-8 percent.
Export Taxation
Developing countries—fuel exporters
Indonesia6/11/87LiberalizationSurcharge on coffee exports abolished.
Developing countries—other
Argentina9/22/87LiberalizationExport taxes on wheat, corn, sorghum, and edible oil eliminated and export taxes on unprocessed soybeans, sunflower seeds, flax, and wood products reduced.
Dominica7/1/87IntroductionExport levy on bananas introduced.
Guinea-Bissau5/4/87LiberalizationEffective export tax rate on cashew nuts reduced from 80 percent to 50 percent.
5/4/87EliminationExport taxes on products other than cashew nuts abolished.
Haiti10/1/87EliminationExport duties on coffee eliminated.
Honduras7/30/87LiberalizationExport tax on bananas reduced.
11/4/87LiberalizationExport tax on coffee reduced.
Pakistan7/1/87TighteningExport duty of PRs 5 per kilogram imposed on cotton yarn exports.
Sierra Leone7/1/87TighteningExport taxes on coffee and cocoa increased to 17.5 percent.
Sri Lanka11/18/87EliminationExport duties on nontraditional agricultural and marine products eliminated.
11/18/87LiberalizationSpecific export duties on tea reduced by an average of 33 percent.
Zaïre6/29/87LiberalizationExport taxes on most agricultural products abolished.
Special Credit Facilities
Developing countries—other
Argentina9/9/87TighteningProducers of inputs used in the production of exports given access to prefinancing regime.
Thailand2/27/87LiberalizationPromissory notes issued by rice exporters refinanced by Bank of Thailand.
4/7/87LiberalizationRegulations on the financial facility extended to exporters revised.
6/23/87LiberalizationRefinancing rate by Bank of Thailand for rice export promissory notes increased.
Turkey2/20/87ExtensionAccess of exporters to special credit facilities expanded.
Export or Exchange Guarantees
Developing countries—fuel exporters
Venezuela2/27/87LiberalizationRequirement of bank guarantee eliminated for exports to Netherlands Antilles.
Repatriation and Surrender of Export Proceeds and Surrender Requirements
Industrial countries
Belgium and Luxembourg1/1/87LiberalizationReporting procedures simplified.
Italy9/13/87TighteningExport credits granted to foreign firms for term of up to 18 months subjected to a 75 percent foreign currency financing requirement and repayment of foreign currency export credits ahead of maturity prohibited, except in the case of advanced repayment by foreigners.
Developing countries—fuel exporters
Ecuador5/7/87TighteningSurrender requirement periods for private sector export proceeds shortened.
Syrian Arab Republic3/3/87LiberalizationPrivate sector exporters authorized to retain 50 percent of their export proceeds to finance imports of production inputs.
4/20/87LiberalizationPrivate exporters of specified industrial and agricultural products authorized to retain 75 percent of their export proceeds for financing of imports from a permitted list.
7/12/87TighteningRepatriation period of export proceeds shortened.
11/11/87LiberalizationExporter categories authorized to retain 75 percent of proceeds to finance imports expanded.
Venezuela2/18/87TighteningExports not permitted to be effected in bolívares.
11/12/87LiberalizationSurrender requirements relaxed for exporting firms.
Developing countries—other
Afghanistan1/87Tightening/LiberalizationSurrender requirements for certain export proceeds reduced, while others increased or introduced.
China, People’s Republic of1/20/87LiberalizationForeign investment firms permitted to purchase products locally for export.
Colombia11/13/87LiberalizationMinimum surrender price for coffee increased from US$180.03 per pound in October to US$188.71.
Dominican Republic11/12/87IntroductionMandatory deposit requirement established for export proceeds.
Egypt11/17/87LiberalizationExport proceeds surrender requirements for private sector exports of peanuts, fresh onion, fresh garlic, potatoes, citrus fruits, and fresh fish eliminated. Additional specified public sector export receipts transferred from commercial bank pool to new bank market.
Honduras12/30/87TighteningTransferable certificates of foreign exchange (Cetras) introduced.
Liberia10/87IntroductionExports of wood products required to have at least 25 percent local processing content.
Malaysia1/1/87LiberalizationExport receipts allowed to be received in any other currency except those of Israel and South Africa.
Mauritania1/29/87IntroductionExporters authorized to retain 15 percent of export proceeds and use them for specified purposes.
São Tomé and Principe6/28/87LiberalizationExporters allowed to retain 30 percent of export proceeds to finance imports of specified capital goods and inputs.
Sudan1/5/87LiberalizationProportion of export proceeds to be surrendered in the commercial bank market increased.
10/3/87TighteningAll proceeds from export of sesame, ground nuts, and livestock required to be surrendered in official market.
Tanzania8/87LiberalizationForeign exchange retention rate for all nontraditional exports set at maximum of 50 percent.
Thailand3/23/87LiberalizationMaximum value of each export transaction allowed without approval from Bank of Thailand raised to B 50,000.
Zambia1/12/87LiberalizationForeign exchange retention period for exporters lengthened.
6/5/87TighteningExports proceeds required to be surrendered to Bank of Zambia.
State Trading
Industrial countries
United States7/1/87IntroductionPlans for countertrade involving agricultural products and petroleum transactions announced.
Developing countries—fuel exporters
Syrian Arab Republic11/11/87LiberalizationPrivate sector importers authorized to import raw materials for shoe, soft drink, soap, and textile industries.
Developing countries—other
Hungary7/1/87LiberalizationGeneral trading rights of enterprises with exports of more than US$1 million in the previous year expanded.
Mozambique, People’s Republic of12/31/87LiberalizationNumber of products that must be exported or imported through state trading companies reduced.
São Tomé and Principe6/28/87LiberalizationMonopoly import right of Ecomex limited to six products.
Togo1/1/87LiberalizationImport monopoly of Société Nationale de Commerce (Sonacom) for selected alcoholic beverages abolished.
Uganda11/87LiberalizationMonopolies for exports of certain agricultural products, hides and skins, and timber liberalized.
Current Invisibles
Foreign Exchange Allocations for Travel, Medical Expenses, or Studying Abroad
Industrial countries
France7/8/87EliminationLimit on tourist travel allowance eliminated.
Iceland3/1/87LiberalizationForeign exchange allocation for tourist travel increased.
Ireland1/1/87LiberalizationBasic travel allowance increased to Ir £ 200, and maximum allowance that may be authorized by a commercial bank without reference to central bank increased to Ir £ 5,000, effective January 1, 1988.
Italy5/13/87LiberalizationLimit on foreign currency acquired by residents traveling abroad raised to SDR 1,250 per journey.
Spain3/10/87LiberalizationMaximum limit on tourist travel allowance abolished.
Developing countries—fuel exporters
Algeria1/1/87TighteningTravel allowance of DA 1,000 granted every four years, instead of two, as previously.
Tunisia4/87LiberalizationAnnual settlement and monthly foreign exchange allowances for students abroad increased.
Developing countries—other
Cyprus7/1/87LiberalizationBasic tourist travel allowances raised.
Fiji6/11/87TighteningAnnual limit on gift remittances reduced from F$500 to F$100 per donor.
10/7/87TighteningAmount of travel allowances authorized banks are empowered to provide to residents reduced from F$2,000 to F$1,000 a person a trip.
Greece1/1/87LiberalizationResidents’ allowance for travel to EC countries raised.
Guinea1/1/87LiberalizationAllocations for tourist travel limited to US$500 a person a trip, with maximum of four trips a year.
Hungary3/12/87LiberalizationForeign exchange allocation for travel to non-CMEA countries increased to FT 18,000 an adult and FT 2,800 a child.
11/1/87LiberalizationForeign exchange allocation for travel to non-CMEA countries increased to FT 19,000 an adult and FT 3,000 a child.
India6/87LiberalizationBlanket permit scheme liberalized, by which exporters can use their foreign exchange holdings.
Israel3/8/87LiberalizationLinkage of foreign travel tax to consumer price index discontinued.
3/28/87LiberalizationSurcharges on tickets for foreign travel eliminated.
4/23/87LiberalizationExchange allowances for travel, family support, gifts, and higher education increased.
Korea5/4/87LiberalizationUse of credit cards when traveling abroad liberalized. Monthly allowance for students living abroad increased.
6/1/87LiberalizationAllocations for each overseas trip to visit relatives or for other nonbusiness purposes increased.
7/10/87LiberalizationLimit on remittances for family maintenance increased.
12/28/87LiberalizationCash allowance for Koreans traveling abroad increased. Use of credit cards liberalized; amounts allowed for transfers for weddings or funerals increased.
Lesotho9/22/87LiberalizationTourist and business travel allowances increased.
Morocco1/29/87LiberalizationIncrease in daily and per trip allowance for business travel.
7/14/87LiberalizationIncrease in foreign travel allowance for Moroccan workers abroad.
Pakistan8/30/87LiberalizationAllowances for study abroad increased.
Peru4/4/87TighteningPurchases of foreign exchange for overseas tourist travel limited to US$4,500 and US$3,000 for business travel.
Sri Lanka1/1/87LiberalizationForeign exchange allowances for business travel abroad increased.
9/10/87LiberalizationForeign exchange allowances for travel abroad increased.
Suriname1/15/87TighteningLimits on travel allowances reduced.
Turkey6/8/87LiberalizationCertain allowances increased, and approval authority of commercial banks extended.
Zambia5/4/87TighteningHoliday travel allowances ceased to be granted.
Outward Transfers or Payments for Services Rendered by Nonresidents
Developing countries—other
Argentina6/1/87LiberalizationDebt conversion scheme introduced under which remittances of dividends abroad are allowed after four years.
Brazil2/20/87TighteningInterest payments to nonresident commercial banks accrued on medium- and long-term debt made subject to deposit at the central bank.
5/28/87TighteningInterest payments on official medium- and long-term loans falling due during 1/1/85–12/31/86 made subject to deposit at central bank.
Burundi1/1/87LiberalizationLimits on salary remittances by foreign workers and profit remittances increased.
Chile1/1/87LiberalizationAmount of debts eligible for preferential exchange rate reduced gradually.
Dominican Republic6/17/87IntroductionSurrender requirement for proceeds from invisibles introduced.
11/12/87EliminationSurrender requirement for proceeds from invisibles abolished.
Egypt5/10/87LiberalizationSpecified public sector invisible payments transferred from commercial bank pool to new bank market. Specified private sector invisibles (subject to ceilings in most cases) permitted to be effected through new bank market.
9/15/87LiberalizationLaw 43 companies authorized to transfer profits abroad through new bank market, provided funds in capital and working accounts are fully utilized.
9/15/87TighteningFunds in export retention accounts required to be fully utilized before payment of authorized invisibles (public and private sector) can be made through new bank market.
11/18/87LiberalizationAdditional specified public sector invisible payments transferred from commercial bank pool to new bank market.
Fiji6/29/87IntroductionRemittances of retained profits accumulated in previous years restricted.
Greece3/4/87LiberalizationForeign banks permitted to repatriate their profits.
Guinea1/1/87EliminationTransfers of certified dividends and royalties permitted in full.
1/1/87LiberalizationTransfers abroad of salaries by expatriate workers authorized up to a limit of 40 percent of base earnings.
1/1/87LiberalizationAll invisible payments made eligible to purchase foreign exchange at auctions, except for limitations placed on purchases for tourist travel and tranfer abroad of salaries by expatriate workers.
1/21/87LiberalizationPrivate individuals paid up to 50 percent of value of gold sold to central bank in foreign exchange and in cash.
Jamaica7/15/87LiberalizationAllowances for remittances from emigrant property income, remittances for family maintenance, and cash gifts increased.
Zambia5/4/87TighteningRemittances of salaries by expatriates on contract employment limited to one third of contract earnings, up to annual maximum of K 9,600.
5/4/87TighteningRemittances of fees for primary and secondary education, except for students already enrolled, and family maintenance allowance prohibited.
8/27/87TighteningCertain classes of expatriate workers prohibited from remitting allowances or required to limit annual remittances.
Zimbabwe6/87TighteningLimits on remittances of dividends and profits to nonresidents reduced.
Import and Export of Foreign and Domestic Currency Notes, and Holdings of Foreign Currency Domestically
Industrial countries
Italy5/13/87LiberalizationLimit on exportation of Italian bank notes raised from Lit 400,000 to Lit 500,000 per person, and use of credit cards abroad to obtain cash advances permitted.
5/13/87LiberalizationImport of Italian bank notes by both residents and nonresidents liberalized.
Spain10/87LiberalizationExport of foreign currency notes and traveler’s checks allowed.
Developing countries—other
Colombia7/29/87LiberalizationDeposits to foreign currency accounts facilitated.
Egypt8/20/87LiberalizationRequirement that US$150 be converted at commercial bank pool rate by nonresidents when entering the country abolished.
Peru4/3/87IntroductionRequirement of prior central reserve bank approval for payments for nonfinancial services.
Sierra Leone11/3/87TighteningHolding of foreign exchange beyond three days made illegal.
Sri Lanka9/10/87LiberalizationObligation of foreigners to declare foreign exchange brought into Sri Lanka limited to amounts greater than US$100 in currency notes or US$1,000 in monetary instruments.
Yugoslavia10/1/87LiberalizationAmount of domestic currency notes travelers can take out or bring into country increased.
Capital Controls
Commercial Banks’ International Transactions
Industrial countries
Finland2/1/87LiberalizationCompanies or cooperative societies engaged in business activity exempted from regulations of foreign credits with a maturity of at least five years.
Japan5/22/87LiberalizationCertain Japanese banks and securities companies allowed to transact financial futures abroad for their own accounts.
Spain1/7/87LiberalizationRestrictions on specific spot and forward position lifted, and banks allowed to take short foreign currency positions.
Sweden2/1/87LiberalizationAll foreign exchange transactions permitted through an authorized bank.
Developing countries—other
Brazil3/11/87LiberalizationSpecial short-term line of credit in foreign currency for domestic commercial banks established by central bank.
Nonresident Accounts and Resident Foreign Exchange Accounts
Industrial countries
Belgium and Luxembourg1/1/87LiberalizationDistinction between bilateral and convertible accounts eliminated.
France5/21/87LiberalizationEnterprises allowed to maintain foreign currency accounts in France; exporters allowed to maintain these accounts overseas, subject to certain limits.
Ireland1/1/87LiberalizationRestrictions on timing and amount of asset transfers upon emigration to a non-EC country abolished; limit on purchase of properties located outside the EC increased from Ir £ 20,000 to Ir £ 50,000.
1/1/87LiberalizationLimit on personal loans or gifts to non-EC residents raised from Ir £ 500 to Ir £ 3,000 per person.
Italy3/20/87IntroductionA 25 percent requirement on net increases in bank deposits in foreign currency introduced.
5/13/87LiberalizationMaximum holding periods for funds credited in foreign exchange accounts lengthened.
5/13/87LiberalizationPeriod within which residents must surrender foreign currency holdings lengthened. Amount exempted from surrender increased to Lit 200,000.
5/13/87LiberalizationPenalty for unauthorized debit balances for lira accounts held by nonresidents lifted.
9/13/87TighteningMaximum holding periods for funds credited to foreign exchange accounts reduced.
9/13/87EliminationReserve requirements on net increases in bank deposits in foreign currency removed.
Spain4/27/87TighteningCommercial banks prohibited from paying interest on convertible peseta account balances exceeding Ptas 10 million.
Developing countries—fuel exporters
Tunisia4/87NeutralRegulations relating to nonresident accounts in foreign exchange and convertible dinar accounts for use by residents for business purposes revised.
Developing countries—other
Bangladesh2/4/87TighteningInterest accrued on education foreign currency accounts required to be converted into local currency.
Brazil7/30/87LiberalizationCertain official institutions allowed to open foreign exchange accounts for importation under letters of credit.
Egypt5/5/87TighteningMoney dealers and correspondents abroad permitted only to withdraw their deposits in domestic currency with local banks. Opening of new accounts by these individuals prohibited.
6/9/87TighteningTransfers of foreign exchange from retention accounts to free accounts prohibited.
9/15/87LiberalizationA limit on percentage of export proceeds in retention accounts that can be used to finance invisibles introduced.
El Salvador6/10/87LiberalizationExporters permitted to sell foreign exchange to importers directly from their foreign exchange accounts.
12/87LiberalizationOpening of new U.S. dollar accounts by exporters permitted.
Peru4/4/87LiberalizationConversion of proceeds of previously blocked U.S. dollar-denominated CDs authorized at “free” official financial market rate, provided proceeds were invested in exchange-rate-indexed inti CDs for at least one year.
7/29/87IntroductionHolding of foreign-denominated bank accounts by Peruvian residents either in Peru or abroad, with limited exceptions, prohibited.
Philippines11/23/87LiberalizationForeign currency notes allowed to be deposited in foreign currency accounts.
Poland1/1/87LiberalizationForeign exchange retention accounts introduced.
South Africa3/24/87IntroductionInterim arrangements on debt repayment concluded.
Zaïre7/1/87LiberalizationResidents’ foreign exchange accounts permitted without authorization of Bank of Zaïre.
Zimbabwe1/87LiberalizationNonresidents over 65 years of age holding certain blocked funds permitted to transfer funds under certain conditions.
Portfolio Investment
Industrial countries
France5/21/87LiberalizationResidents allowed freely to contract foreign currency loans and borrow in francs up to F 50 million.
Iceland5/25/87LiberalizationRegulation on foreign borrowing liberalized.
7/10/87IntroductionA tax on foreign borrowing introduced.
9/24/87TighteningRegulations on borrowing abroad tightened through an increase in required share of domestic financing.
Ireland11/13/87LiberalizationResident persons allowed to invest up to Ir £ 5,000 in foreign securities during 1988.
Italy5/13/87LiberalizationThe 15 percent compulsory non-interest-bearing deposit for investment in foreign securities and real estate abolished.
Norway3/20/87IntroductionGranting of loans, credits, or guarantees to and investments in South Africa and Namibia prohibited.
12/17/87LiberalizationForeign firms and individuals permitted to purchase up to NKr 1 million in Norwegian bonds.
Spain2/2/87LiberalizationInternational organizations of which Spain is a member authorized to borrow in the domestic peseta capital market.
3/13/87LiberalizationLimit on each foreign loan not related to merchandise trade raised.
7/22/87TighteningInvestment by nonresidents in domestic Treasury bonds and Treasury bills in book entry form regulated, and short-term “Repurchase Agreements” by nonresidents on domestic financial assets prohibited.
Sweden3/1/87LiberalizationLimit on foreign borrowing by enterprises abolished.
Developing countries—other
Brazil11/17/87LiberalizationA general framework for conversion of debt into equity announced.
Fiji6/29/87TighteningOverseas investments and other forms of capital transfers abroad prohibited.
Greece1/11/87LiberalizationRepatriation of capital and profits in respect of borrowing from non-EC countries permitted under certain conditions.
4/22/87LiberalizationEnterprises allowed to borrow in foreign currency without prior approval of Bank of Greece.
9/25/87LiberalizationUse of foreign borrowed funds by certain types of enterprises liberalized.
Malaysia1/1/87LiberalizationNonresident-controlled companies not required to obtain approval to borrow domestically up to M$10 million, provided at least 60 percent of borrower’s total domestic credit facilities are obtained from commercial banks and other financial institutions incorporated in Malaysia.
1/1/87LiberalizationAuthorization for borrowing in foreign currency from nonresidents required only when loans exceed the equivalent of M$1 million, or when total outstanding amount owed by the borrower exceeds M$1 million.
Philippines10/20/87LiberalizationProgram for conversion of external debt into equity investment amended.
Direct Investment
Industrial countries
Australia9/29/87TighteningReal estate investments in residential property by nonresidents made subject to approval.
Ireland11/13/87LiberalizationAnnouncement made that limit on property purchase outside the EC per family will be increased, effective January 1, 1988.
Norway3/20/87IntroductionGranting of loans, credits or guarantees to and investments in South Africa and Namibia prohibited.
Spain5/20/87LiberalizationInvestment abroad by residents, including real estate investments, liberalized.
7/2/87LiberalizationLimitations on foreign direct investments authorized before 1985 liberalization measures abolished.
Sweden3/1/87LiberalizationLimit on real estate purchases abroad by residents liberalized.
Developing countries—fuel exporters
Ecuador8/13/87TighteningDebt-equity conversion scheme temporarily suspended.
Venezuela4/24/87LiberalizationDebt-equity conversion scheme introduced.
Developing countries—other
Argentina6/1/87LiberalizationDebt conversion scheme introduced under which capital repatriation allowed after ten years.
10/14/87LiberalizationDebt conversion permitted through free exchange market, and requirement to bring in matching funds in domestic currency at least equal to face value of debt converted relaxed.
Chile9/29/87LiberalizationSimplified debt-equity conversion for small investors through external investment funds introduced.
Ecuador7/28/87IntroductionRegulations governing foreign direct investment simplified.
Fiji6/29/87TighteningOverseas investments and other forms of capital transfers abroad prohibited.
Jamaica7/28/87IntroductionDebt-equity conversion program introduced.
Korea4/6/87LiberalizationTwenty-six manufacturing sectors opened to foreign investment.
5/1/87LiberalizationUpper limit on overseas investment exempted from prior government screening raised.
7/1/87LiberalizationTax privileges reduced for foreign investments and postinvestment controls relaxed.
9/1/87LiberalizationRestrictions on purchases by Korean companies of real estate abroad liberalized.
12/28/87LiberalizationOverseas investment of less than US$1 million automatically approved, and investments of less than US$5 million exempted from government screening.
Peru4/3/87IntroductionExchange premium established for conversion of foreign capital into intis for foreign direct investments in specified sectors.
Zambia5/11/87LiberalizationForeign creditors with outstanding claims in arrears authorized to withdraw counterpart deposit funds for reinvestment in agricultural, manufacturing, and transportations sectors.
Exchange Arrangements
Changes Affecting the Classification of Exchange Arrangements
AfghanistanSecond QuarterLess flexibleExchange arrangements reclassified from category “Flexibility Limited vis–à–vis a Single Currency” to “Pegged: U.S. Dollar.”
Dominican Republic6/17/87Less flexibleFree market float of peso ceased. Exchange arrangements reclassified from category “Independently Floating” to category “Managed Floating.” Prior to this date, two rates were in effect: the freely floating official rate and a preferential exchange rate applied to priority imports (basic inputs, such as spare parts, fertilizers, insecticides, and essentials, including foodstuffs). The preferential rate was abolished and the newly managed official exchange rate set at RD$3.85 = US$1, then revalued in stages to RD$3.2 = US$1 as of mid-July.
12/12/87More flexibleMarket-determined exchange rate system reestablished for all foreign exchange transactions, and commercial and exchange houses again permitted to deal freely in the exchange market. Exchange arrangements reclassified from category “Managed Floating” to “Independently Floating.”
Egypt5/11/87More flexibleNew bank exchange market created. Exchange rate to be determined daily by a “Chamber” composed of representatives of banks authorized to operate in market. Exchange arrangements reclassified from category “Pegged: U.S. Dollar” to “More Flexible: Managed Floating.” Some transactions previously effected in the commercial bank pool transferred to the new bank market, including tourism receipts, workers’ remittances, some public sector exports, imports and invisible receipts and payments, and financing of public sector imports. Most other transactions transferred from commercial bank pool on November 18, 1987. Private sector permitted to purchase foreign exchange in this market for imports, settle letters of credit opened before May 10, 1987, and specified invisibles. On May 11, 1987 commercial bank pool rate stood at LE 1.367 = US$1, and new bank market rate was set at LE 2.165 = US$1. By December 31, 1987 commercial bank pool rate stood at LE 1.87 = US$1, and new bank market rate stood at LE 2.19 = US$1.
Guyana1/19/87Less flexibleDevaluation of central rate for Guyana dollar of 56 percent to G$10 = US$1. Exchange arrangements reclassified from category “Pegged: Current Composite” to “Pegged: U.S. dollar.” New exchange rate applicable to all recorded foreign exchange transactions, with exception of purchase of gold (G$14 = US$1) and transactions at market-related rates with commercial banks. Buying rates for notes at free window and parallel market rate reported at G$18 = US$1 and G$20 to G$22 per US$1, respectively.
Israel1/13/87Less flexibleNew sheqel devalued by 9.2 percent against reference basket of currencies (10 percent in local currency terms). Exchange arrangements reclassified from category “More Flexible: Managed Floating” to “Pegged: Currency Composite,” following respective measures in August 1986.
Maldives3/1/87More flexibleExchange rate allowed to float freely. Market participation includes primarily commercial banks, public and private enterprises, and individuals. Exchange arrangements reclassified from category “Pegged: Currency Composite” to “More Flexible: Independently Floating.” As a result, the rufiyaa depreciated by 29 percent.
MauritaniaFirst QuarterMore flexibleAuthorities reaffirmed commitment to improve further competitiveness of external sector by taking appropriate exchange rate action following nominal effective appreciations of the ouguiya in 1982 and 1983, and real effective depreciations of 17 percent in 1985 and 2 percent in 1986. Exchange arrangements reclassified from category “Pegged: Currency Composite” to “More Flexible: Managed Floating.”
Mozambique, People’s Republic of1/31/87Less flexibleThe peg to a currency basket temporarily suspended, and substituted by a fixed exchange rate of the metical (midpoint depreciation of 80.9 percent in terms of the U.S. dollar) against the U.S. dollar. Exchange arrangements reclassified from category “Pegged: Currency Composite” to “Pegged: U.S. Dollar.”
PeruFirst QuarterMore flexiblePursuant to stated policy intention of depreciating the inti by a minimum of 2.2 percent per month starting in 1987, the inti was depreciated in official (MUC) and financial exchange markets by 6.4 percent in U.S. dollar terms in first quarter of 1987. Exchange arrangements reclassified from category “Pegged: U.S. Dollar” to “More Flexible: Managed Floating.”
End-JulyLess flexibleMonthly 2.2 percent depreciation of the inti in the two exchange markets ceased with official (MUC) rate fixed at its prevailing level. A series of premia over MUC rate established for certain imports and exports, resulting in seven rates applying to exports and three rates applying to imports. A more depreciated financial market rate established for tourism and transactions in U.S. dollar-denominated certificates of deposit, which can also be used to pay for imports. Above measures resulted in a weighted average depreciation of about 11 percent in terms of intis per U.S. dollar. Exchange arrangements reclassified from category “More Flexible: Managed Floating” to “Pegged: U.S. Dollar.”
São Tomé and Principe7/22/87More flexibleA basket of nine currencies representing major trading partners of São Tomé and Principe replaced the SDR as reference peg. Exchange rate of the dobra devalued by 54.75 percent in terms of the SDR. The dobra had been pegged to the SDR since September 1977. Exchange arrangements reclassified from category “Pegged: SDR” to “Pegged: Other Currency Composite.”
Sierra LeoneThird QuarterLess flexibleExchange rate of the leone, floating since June 27, 1986, had depreciated from Le 14 = US$1 in July 1986 to Le 53 = US$1 in April 1987. Steadily appreciated by the authorities to Le 23 = US$1 at end-July, and kept unchanged after that. Exchange arrangements reclassified from category “More Flexible: Independently Floating” to “Pegged: U.S. Dollar.”
SingaporeThird QuarterMore flexibleSingapore dollar permitted to float, and Monetary Authority of Singapore monitors its value against a trade-weighted basket of currencies. Exchange arrangements reclassified from category “Pegged: Currency Composite” to “More Flexible: Managed Float.”
Somalia6/15/87More flexibleForeign exchange auction extended in coverage. Two separate auctions (Dutch system), one for import payments, the other for payments for education and travel, to absorb free market and previous official market transactions. Exchange arrangements reclassified from category “Adjusted According to a Set of Indicators” to “More Flexible: Independently Floating.” Surrender requirements introduced for all foreign exchange receipts, except for private funds remitted directly from abroad. A separate fixed exchange rate set for imports of crude petroleum and petroleum products by the official importing agency. Private funds remitted directly from abroad sold at services auction rate to be used directly by account holder for permitted imports, service payments, or transfers abroad. On September 16, 1987 range of exchange rates in import auction was So. Sh. 155.25 = US$1 to So. Sh. 170 = US$1; in services auction, So. Sh. 147 = US$1 to So. Sh. 155 = US$1; for petroleum and petroleum products, So. Sh. 105 = US$1. Central bank conducts on the same day a separate auction of funds offered for sale by holders of external accounts at commercial bank. Sellers receive weighted average rate of successful bids at this auction, less 2 percent. Successful bidders permitted to use foreign exchange for their own payments for education and travel expenses, within the specified limits.
10/11/87Less flexibleForeign exchange auction system terminated and exchange rate of the Somali shilling fixed at So. Sh. 100 = US$1, representing a revaluation of 60 percent in terms of the U.S. dollar. Exchange arrangements reclassified from category “More Flexible: Independently Floating” to “Pegged: U.S. Dollar.”
Sudan10/3/87Less flexibleOfficial and commercial bank exchange rates unified,1 resulting in a 29 percent devaluation of trade-weighted average exchange rate. Exchange arrangements reclassified from category “Pegged: Currency Composite” to “Pegged: U.S. Dollar.”
Zambia5/4/87Less flexibleWeekly foreign exchange auction system (reintroduced on March 28, 1987) discontinued, exchange rate for the kwacha pegged at K 8.0 = US$1 (representing a revaluation of 87.5 percent), and a foreign exchange management committee established to allocate foreign exchange for all payment transactions. Exchange arrangements reclassified from category “More Flexible: Independently Floating” to “Pegged: U.S. Dollar.”
Changes Not Affecting the Classification of Exchange Arrangements
Countries Whose Exchange Rates are Pegged to the U.S. Dollar
Finland12/11/87DepreciationSlight adjustments in weights of 12 currencies in the markka’s trade-weighted index implemented: the weights of the deutsche mark, pound sterling, and U.S. dollar increased; those of the Swiss franc and Japanese yen decreased. Weights of remaining currencies comprising the basket2 unchanged, as was the range of the index (Fmk 101.3 to Fmk 106.0).
Guyana9/14/87DepreciationSpecial exchange rate for gold and diamonds eliminated. Exchange of these products effected at rate in bank’s foreign exchange window (G$21 per U.S. dollar).
Lao, People’s Democratic Republic9/1/87DepreciationSeven official exchange rates in effect, ranging from KN 10 per dollar to KN 380 per dollar. Number of exchange rates reduced to four within same range by unification of three exchange rates applying to local expenses of embassies (KN 35 per dollar) and inward remittances (KN 108 and KN 270 per dollar) at a level of KN 350 per dollar.
Mozambique, People’s Republic of6/27/87DepreciationMetical devalued by 50 percent in terms of the U.S. dollar.
Nicaragua3/1/87DepreciationThe proportion of proceeds of nontraditional agricultural exports eligible for surrender at “free” exchange rate raised from 25 percent to 50 percent.
Peru10/25/87DepreciationOfficial exchange rate of the inti devalued by 20.6 percent in terms of the U.S. dollar. The number of exchange rates reduced from ten to seven. These changes involved a weighted nominal depreciation of about 26 percent in terms of intis per U.S. dollar.
12/14/87DepreciationInti devalued further by 39.4 percent in terms of the U.S. dollar.
Sudan1/5/87DepreciationThe proportion of all export proceeds, except cotton and gum arabic, to be converted at official rate reduced from 75 percent to 50 percent. Effective exchange rate applicable to these proceeds depreciated by 9.8 percent. Although cotton and gum arabic export proceeds continue to be surrendered entirely in the official market, they receive same effective exchange rate as applicable to other commodities.
Trinidad and Tobago1/23/87DepreciationUnification of exchange rate system at TT$3.60 = US$1. Preferential rate of exchange (TT$2.40 = US$1) in effect since late 1985 for “essential” imports (about 25 percent of total imports) eliminated.
Uganda5/15/87DepreciationNew currency introduced, 1 new shilling replacing 100 old Uganda shillings and exchange rate of the Uganda shilling devalued by 77 percent in foreign currency terms.
Venezuela6/22/87Private foreign exchange operators (other than exchange houses and sectors) banned.
Viet Nam4/21/87

and

7/21/87
DepreciationExchange rate of the dong for private inward remittances devalued cumulatively by 81 percent in terms of the U.S. dollar.
12/1/87DepreciationOfficial exchange rate of the Vietnamese dong, applicable to a limited number of transactions, devalued by 78.3 percent in terms of the U.S. dollar. A premium of 20 percent applied to individuals and representation of international organizations located in Viet Nam.
Zambia1/28/87AppreciationKwacha to be pegged to basket of currencies of Zambia’s main trading partners and permitted to float within a band of K 9.00–K 12.50 per U.S. dollar on basis of auction. No auctions were held, and rate set at K 9.00 = US$1.
3/28/87AppreciationA new two-tier exchange rate system introduced; an official exchange rate and previously unified auction-determined rate to be reunified in 18 months, the exchange rate to be determined by auctions. Official exchange rate applies to government procurement of medicines and educational materials, government debt service, and proceeds from external loans and grants. All other transactions effected at auction rate (Dutch system). Official exchange rate set at K 9 = US$1, to be adjusted periodically in line with auction rate.
5/1/87AppreciationThe two-tier arrangement abolished and the kwacha pegged to the U.S. dollar at K 8.00 = US$1.
Countries Whose Exchange Arrangements are Pegged to a Currency Composite
BangladeshFourth

Quarter
DepreciationSpread between official and secondary market exchange rates reduced. Secondary exchange rate revalued by 0.1 percent in October and by 0.2 percent in December; official exchange rate devalued by 0.6 percent in November (percentage changes in terms of the U.S. dollar). Spread between the two exchange rates, 5.5 percent at end-December.
BurundiFirst

Quarter
DepreciationBurundi franc devalued on three separate occasions by a cumulative 5.9 percent in SDR terms during first quarter.
Fiji6/29/87DepreciationFiji dollar devalued 17.8 percent against basket of currencies to which it is pegged, a depreciation of 17.7 percent in terms of the U.S. dollar.
10/7/87DepreciationFiji dollar devalued 15.25 percent against reference basket, representing a depreciation of 15.3 percent in terms of the U.S. dollar.
Hungary3/11/87DepreciationForint depreciated by 7.4 percent against basket of currencies to which it is pegged for purposes of determining exchange rates vis-à-vis convertible currencies. Forint appreciated vis-à-vis the transferable ruble by 3.7 percent.
11/11/87DepreciationForint devalued by 5 percent against reference basket, a 4.3 percent depreciation in terms of the U.S. dollar.
Israel1/11/87DepreciationNew Israeli sheqel depreciated by 1.7 percent in terms of basket of currencies to which it is pegged; appreciated vis-à-vis the U.S. dollar by 3.2 percent.
Malawi2/7/87DepreciationKwacha devalued by 20 percent in terms of the U.S. dollar.
Malta11/26/87Maltese lira exchange rate formula revised to include the SDR. Reference basket includes the Belgian franc, deutsche mark, French franc, Italian lira, Japanese yen, Netherlands guilder, Swiss franc, pound sterling, U.S. dollar, and the SDR.
Poland1/1/87DepreciationZloty depreciated against basket of currencies to which it is pegged for purposes of determining exchange rates against convertible currencies. In terms of the U.S. dollar, depreciation amounted to 19.5 percent. Exchange rate for the transferable ruble depreciated by 17.4 percent.
Romania10/1/87AppreciationNoncommercial exchange rate of the leu revalued against basket of currencies to which it is pegged, representing an appreciation of 11.6 percent in terms of the U.S. dollar. Commercial exchange rate unchanged, resulting in an increase in margin between the two rates.
TanzaniaFirst

Quarter
DepreciationAdjustment of the Tanzanian shilling accelerated; by end-March exchange rate was T Sh 57.2 = US$1, compared to T Sh 48.4 = US$1 specified in program supported by a stand-by arrangement. Authorities reaffirmed commitment regarding maintenance of margin with respect to program guidelines, and to target of achieving equilibrium exchange rate by mid-1988.
Countries Whose Exchange Rates are Determined Under a Cooperative Arrangement
European Monetary

System
1/12/87Realignment of central rates resulted in appreciation of the deutsche mark, Netherlands guilder (3 percent each), and Belgian franc and Luxembourg franc (2 percent each). The Danish krone, French franc, Irish pound, and Italian lira all remained unchanged. The notional ECU central rates3 for the pound sterling and Greek drachma devalued to reflect developments in market rates of these currencies since realignment of August 1986.
Countries Whose Exchange Arrangements are Adjusted According to a Set of Indicators
Ecuador12/29/87DepreciationIntervention exchange rate depreciated by 1.3 percent in terms of the U.S. dollar to maintain a spread of 10 percent or less between central bank intervention rate and free market exchange rate.
MadagascarFirst

Quarter
DepreciationMalagasy franc devalued on four separate occasions by a cumulative 2.6 percent in terms of the U.S. dollar.
Mexico11/18/87DepreciationFree market exchange rate of the peso permitted to float freely. Float resulted in a midpoint depreciation of the peso of around 30 percent in terms of the U.S. dollar.
12/14/87DepreciationControlled exchange rate of the peso devalued by 18 percent in terms of the U.S. dollar. Spread between parallel and controlled market exchange rates kept within a margin of less than 2 percent.
Countries Whose Exchange Rates are Determined by a Managed Float
Argentina2/26/87DepreciationAustral devalued by 6.6 percent in terms of the U.S. dollar.
9/1/87DepreciationBeginning in September, pace of depreciation of the austral substantially accelerated.
10/14/87DepreciationAustral fixed in the official market at ₳ 3.50 = US$1, representing a 33 percent cumulative depreciation since end-September. A financial exchange market rate was introduced, which is allowed to fluctuate freely; in effect, this rate replaces illegal parallel exchange rate. Transactions at fixed official exchange rate include all trade-related current and capital transactions, all public sector transactions, all disbursements from international organizations, amortization and refinancing of private sector loans disbursed prior to 10/9/87, and servicing of debt contracted through official exchange market. Transactions in free market include travel and tourism, other non-trade-related nonfinancial services of private sector, direct investment, and private borrowing without public guarantee. Spread between fixed and free exchange rates averaged about 20 percent from mid-October to end–December.4
Guinea-Bissau5/4/87DepreciationPeso devalued by 58.6 percent in terms of the U.S. dollar to eliminate gap between official and parallel markets.
Iceland1/28/87Reference basket for determination of exchange rate of the króna changed: bilateral trade weights replaced by weights of individual currencies in exchange transactions (buying and selling). This change resulted in an increase of weight of the U.S. dollar in reference basket from about 29.9 percent to about 55.4 percent.
10/12/87Reinstatement of reference basket based on bilateral trade weights, replacing basket based on weights of individual currencies in exchange transactions; resulted in a reduction of weight of the U.S. dollar in basket from 55.4 percent to 29.9 percent.
Nigeria7/2/87DepreciationDual exchange market unified, exchange rate to be determined by auctions. Despite unification, a difference exists between exchange rate in auction market for sale of official receipts to authorized dealers, and exchange rate in autonomous market for resale of these auctioned amounts and all other foreign exchange receipts and payments.
People’s Republic of China11/86DepreciationCompanies in the four special economic zones and foreign investment companies permitted to trade foreign exchange in special adjustment centers at mutually agreed rates. These rates have depreciated with respect to administered official renminbi rate.
Yugoslavia11/16/87DepreciationDinar devalued by 19.5 percent in terms of the U.S. dollar.
Countries Whose Exchange Rates are Independently Floating
Bolivia1/1/87New monetary unit, the Boliviano, equal to one million old pesos introduced.
Ghana2/21/87DepreciationExchange rates of the Ghanaian cedi unified at Ȼ 150 = US$1, with all foreign exchange transactions through official banking system effected at prevailing auction market rate. Scope of auction market broadened significantly.
3/13/87DepreciationBids for foreign exchange to cover service and transfer payments approved by exchange control authorities eligible for participation in the auction.

See Explanatory Note on Coverage of Part Two, page 61.

All rates were unified with the exception of the rate of LSd 3.25 per accounting dollar applicable to the bilateral payments agreement with Egypt.

The Belgian franc, Danish krone, French franc, Italian lira, Netherlands guilder, Norwegian krone, and Swedish krona.

Notional rates for these currencies are established for the purposes of the Common Agricultural Policy (CAP) and the calculation of the divergence indicator.

Immediately prior to the exchange rate measure of October 4, 1987, the spread between the official and parallel exchange markets had been in excess of 40 percent.

See Explanatory Note on Coverage of Part Two, page 61.

All rates were unified with the exception of the rate of LSd 3.25 per accounting dollar applicable to the bilateral payments agreement with Egypt.

The Belgian franc, Danish krone, French franc, Italian lira, Netherlands guilder, Norwegian krone, and Swedish krona.

Notional rates for these currencies are established for the purposes of the Common Agricultural Policy (CAP) and the calculation of the divergence indicator.

Immediately prior to the exchange rate measure of October 4, 1987, the spread between the official and parallel exchange markets had been in excess of 40 percent.

See Explanatory Note on Coverage of Part Two, page 61.

1

Nominal effective exchange rates referred to in this report are based on trade weights and derived from the Fund’s multilateral exchange rate model (MERM).

2

In Egypt, managed floating was introduced for the commercial bank foreign exchange market only.

3

Burma, Burundi, Dominican Republic, Ecuador, Ethiopia, Grenada, Guyana, Haiti, Iceland, India, Nicaragua, Nigeria, Paraguay, Peru, Saudi Arabia, Sierra Leone, Solomon Islands, Somalia, South Africa, Spain, Sri Lanka, Suriname, Tanzania, Tonga, Uganda, United Kingdom, Viet Nam, Yugoslavia, Zaïre. More than one notification was made in a number of these countries.

*

Positions as of end-1986 are shown in parentheses.

4

Excluding the arrangements of Democratic Kampuchea, for which information is not available.

5

Notional rates for these currencies are established for purposes of the Common Agricultural Policy (CAP) and the calculation of the divergence indicator.

6

Based on the Fund’s MERM, in which the implicit weighting structure takes account of the relative importance of the country’s trading partners in its direct bilateral relationships with them, of competitive relationships with “third” countries in particular markets, and of estimated elasticities affecting trade flows.

7

The Yemen Arab Republic, which unified its dual exchange market on January 1, 1988, is not counted in this number.

8

The United States has not requested that this restraint be renewed since March 1985. Japan has extended it by one more year, to March 1989, with exports of cars to the United States to be maintained at 2.3 million units a year during this period.

9

The following listing of antidumping duties is not exhaustive.

10

Payments arrears evidence an exchange restriction under the Fund’s Article VIII, Section 2(a), or Article XIV, Section 2, when the authorities of a country are responsible for undue delays in approving applications or in meeting bona fide requests for foreign exchange for current international transactions as defined in Article XXX (d). Accordingly, when a government, or a government entity whose financial operations form part of the budgetary process, fails to meet an external payments obligation, the resulting arrears are considered as evidence of defaults by the government rather than exchange restrictions. Similarly, arrears incurred by governments participating in a common central bank are treated as defaults. Although these distinctions are relevant for the purposes of Articles VIII and XIV, in the context of the Fund’s policies on the uses of its resources, defaults and other forms of arrears involving current and capital payments are viewed as having the same broad macroeconomic character and consequences, and are therefore treated in the same manner. All references to payments arrears in this section relate to arrears as defined in the broadest sense.

11

A review of the implementation of Fund policies on members’ external payments arrears was undertaken by the Executive Board in November 1986, the major conclusions of which were summarized in the Annual Report on Exchange Arrangements and Exchange Restrictions, 1987. The conclusions of earlier reviews of Fund policies were summarized in Annual Report on Exchange Arrangements and Exchange Restrictions, 1983 and 1985.

12

As of end-1987, the following Fund members maintained external payments arrears: Antigua and Barbuda, Argentina, Benin, Bolivia, Brazil, Burkina Faso, Burma, Central African Republic, Chad, Comoros, Congo, Costa Rica, Côte d’Ivoire, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, The Gambia, Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Iraq, Liberia, Libya, Madagascar, Malawi, Mali, Morocco, Mozambique, Nicaragua, Nigeria, Panama, Paraguay, Peru, Poland, St. Lucia, São Tomé and Principe, Sierra Leone, Somalia, South Africa, Sudan, Suriname, Syrian Arab Republic, Tanzania, Togo, Uganda, Venezuela, Viet Nam, Zaïre, Zambia.

13

Bilateral payments arrangements maintained between Fund members give rise to restrictive exchange practices subject to Article VIII or Article XIV of the Fund’s Articles of Agreement when they involve exchange restrictions or multiple currency practices. The jurisdictional implications of bilateral payments arrangements are summarized in Annual Report on Exchange Arrangements and Exchange Restrictions, 1985, page 40.

14

In September 1982 the Executive Board reviewed the Fund’s policy with respect to bilateral payments and countertrade arrangements. The conclusion of that review were summarized in Annual Report on Exchange Arrangements and Exchange Restrictions, 1983, pages 44–45.

15

Further discussion of the types and consequences of countertrade practices which may entail exchange restrictions/multiple currency practices may be found in Annual Report on Exchange Arrangements and Exchange Restrictions, 1986, pages 33–34.

16

Members of ASEAN are Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

17

EC membership comprises Belgium, Denmark, France, the Federal Republic of Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and the United Kingdom.

18

CMEA membership comprises Bulgaria, Cuba, Czechoslovakia, the German Democratic Republic, Hungary, Mongolia, Poland, Romania, the U.S.S.R., and Viet Nam.

19

EFTA membership comprises Austria, Finland, Iceland, Norway, Sweden, and Switzerland.

20

The 66 ACP states associated with the EC are divided into the following categories by Lomé III: (1) the least-developed countries—Angola, Benin, Botswana, Burkina Faso, Burundi, Cape Verde, Central African Republic, Chad, Comoros, Djibouti, Dominica, Ethiopia, The Gambia, Grenada, Guinea, Guinea-Bissau, Kiribati, Lesotho, Malawi, Mali, Mauritania, Niger, Rwanda, St. Lucia, São Tomé and Principe, Seychelles, Sierra Leone, Solomon Islands, Somalia, Sudan, Swaziland, Tanzania, Togo, Tonga, Tuvalu, Uganda, and Western Samoa; (2) the island and landlocked countries—Antigua and Barbuda, The Bahamas, Barbados, Equatorial Guinea, Fiji, Jamaica, Madagascar, Mauritius, Papua New Guinea, St. Kitts and Nevis, St. Vincent and the Grenadines, Trinidad and Tobago, Vanuatu, Zaïre, Zambia, and Zimbabwe; (3) others—Belize, Cameroon, People’s Republic of the Congo, Côte d’Ivoire, Gabon, Ghana, Guyana, Kenya, Liberia, People’s Republic of Mozambique, Nigeria, Senegal, and Suriname.

21

The members of Ecowas are Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, and Togo.

22

LAIA members are Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela.

23

Members are the Cook Islands, Fiji, Kiribati, Nauru, Niue, Papua New Guinea, Solomon Islands, Tonga, Tuvalu, Vanuatu, Western Samoa (known collectively as the Forum Island countries), Australia, and New Zealand.

24

OAS members are Antigua and Barbuda, Argentina, The Bahamas, Barbados, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominica, the Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, the United States, Uruguay, and Venezuela.

25

OAU members are Algeria, Angola, Botswana, Benin, Burkina Faso, Burundi, Cameroon, Cape Verde, the Central African Republic, Chad, the Comoros, the Congo, Côte d’Ivoire, Djibouti, Egypt, Equatorial Guinea, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Libyan Arab Jamahiriya, Madagascar, Malawi, Mali, Mauritania, Mauritius, the People’s Republic of Mozambique, Niger, Nigeria, Rwanda, Saharawi Arab Democratic Republic, São Tomé and Principe, Senegal, Seychelles, Sierra Leone, Somalia, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zaïre, Zambia, and Zimbabwe.

26

SADCC members are Angola, Botswana, Lesotho, Malawi, the People’s Republic of Mozambique, Swaziland, Tanzania, Zambia, and Zimbabawe.

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