1. The Minister for Finance circulated to the Government on the 10th October, 1944,² a memorandum which had been prepared by the Governor of the Central Bank³outlining the purposes, and the implications for this country, of the Articles of Agreement of the International Monetary Fund and the International Bank for Reconstruction and Development drawn up at Bretton Woods. No decision was then sought on the question of joining either institution; for one thing the conditions for the admission of new members were then unknown. Both Fund and Bank have commenced business within the last few months. The initial par values of members￿ currencies have with some exceptions been fixed, and the Fund has provided $25 million for France and $6 million and £1½ million sterling for the Netherlands, against the equivalents in national currencies. At the inaugural meetings of the Governors in Savannah, USA, in March, 1946, the following decision was reached regarding applications for membership of the Fund:
   'Subject to any special provisions that may be made for countries listed in Schedule A of the Articles of Agreement, any country may apply for membership in the Fund by filing with the Fund an application setting forth all relevant facts.

   When submitting an application to the Board of Governors, the Executive Directors, after consultation with the applicant country, shall recommend to the Board the amount of the quota, the form of payment, the parity of the currency, conditions regarding exchange restrictions, and such other conditions as, in the opinion of the Executive Directors, the Board of Governors may wish to prescribe.'
   Of the 45 countries listed in Schedule A of the Articles of Agreement 41 have accepted membership, the exceptions being Russia, Haiti, Liberia, and New Zealand. Australia has recently decided to join and the question is still under consideration in New Zealand. Of the countries which, like Ireland, were not listed in Schedule A, Italy, Lebanon, Syria and Turkey have applied for and been admitted to membership of the Fund. The admission of Finland has also been agreed to.

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8. The main obligations which Ireland would assume by membership of the Fund are:
   1. the obligation, after the transitional period allowed by Article XIV, not to impose restrictions without the approval of the Fund on the making of payments and transfers for current international transactions:
   2. the obligation not to engage in any discriminatory currency arrangements;
   3. the payment to the Fund of the subscription, or quota, fixed by the Executive Board of the Fund as a condition of membership. Judging by the quotas fixed in other cases, this might be of the order of $45 million, which, in our circumstances, would have to include 10% of the Central Bank's gold holding, the balance being deposited in the Central Bank for the account of the Fund. The Fund will accept non-negotiable non-interest-bearing Demand Notes from any member in respect of any part of its currency not needed for the Fund's operations.
9. Apart from the advantages which would attach to the successful maintenance by the Fund of stable exchanges and convertibility of current exchange earnings, the chief benefit to members is the right to secure a temporary relief from the Fund to meet a deficit in their balance of payments. In our case, if we were members, such aid would take the form of a sale of foreign exchange by the Fund in payment for which we would have to surrender an amount of Irish currency having the same gold value as the foreign exchange purchased. After a limited period the process would have to be reversed; we would have to repurchase our currency from the Fund, tendering in payment convertible foreign exchange or gold equal in value to the foreign currency originally purchased. It would not be possible to draw more than 25% of our quota in any year, that is, more than, say, $11¼ million, and the maximum amount of foreign exchange we would purchase from the Fund would be twice our quota, or, say $90 million. At the end of each financial year of the Fund we would ordinarily be liable to repay, in the manner already indicated, one-half of our drawings in foreign exchange from the Fund during that year, plus one-half of any increase or minus one-half of any decrease that had occurred during the year in our monetary reserves. The borrowing from the Fund would be subject to charges - a service charge of ¾% and annual charges increasing according to the amount of foreign exchange borrowed and the length of time elapsing before repayment. As an illustration, if $10 million were purchased from the Fund and were repaid as to $5 million at the end of the first year and the balance at the end of the second year the service charge would be $75,000 and the annual charges $87,500 for the two-year period, making a total of $162,500, equivalent to an interest rate of slightly over 0.8%. For a $20 million loan outstanding for 4 years the total charge would be equivalent to almost 2% per annum, simple interest; the actual charge in the 4th year would be $500,000. These charges would probably have to be paid in gold in our circumstances.
10. Before the war the annual import surplus of this country was about £20 million of which about £14 million represented purchases from non-sterling countries in excess of exports to such countries. Our 'invisible' earnings of foreign exchange other than sterling (remittances from the US, sweepstake moneys, US tourist expenditure, etc.) came to only a few million pounds, so that the annual deficit of foreign exchange other than sterling was of the order of $10 million before the war. This deficit was covered by converting into foreign exchange the surplus sterling credits arising from invisible exports, principally income from sterling investments. Our balance of payments was virtually in equilibrium. Our foreign exchange deficit is now much higher owing to the general rise in prices since 1938, inflated domestic purchasing power and accumulated demand for imports. Because the articles required are not available to the same extent as pre-war from sterling sources of supply there is a tendency for more of our expenditure abroad to be in currencies other than sterling. Expenditure in such currencies amounted to roughly £30 million in 1946 and if the trend in the first four months of the present calendar year persists expenditure in currencies other than sterling will be of the order of £40 million for the whole year. Of this total some £30 million can be found only by the conversion of sterling. Imports are, however, running at a rate which exceeds that of our current earnings of foreign exchange including sterling, and during the first half of 1947 our net external assets dropped by £14.4 million. Having regard to the critical situation in Britain we cannot expect to be allowed to draw freely on our accumulated sterling and there must be doubt even as to the continued convertibility of current sterling earnings. It is therefore obvious that the access to temporary overdraft facilities which membership of the Fund would confer would be of strictly limited value. It would not be of any help in solving the great difficulties which would be caused by a limitation of the convertibility of current sterling earnings. The present scale of these earnings is abnormally high and the possibility must be faced of a decline in such important sources of sterling as tourist expenditure and remittances from workers in the United Kingdom. Exports to the UK, which are the basic source of sterling earnings, were considerably less in the first four months of this year than in the corresponding period of 1946.
11. The fact is that we are dependent on the convertibility of sterling for the increasing amounts of dollars and other hard currencies required to pay for essential imports. We have therefore a common interest with Great Britain in maintaining the international value of sterling. The International Monetary Fund and the International Bank would work in this direction. We have had informal intimations that the British Government would wish to see us join the International Monetary Fund so as to strengthen the sterling area representation and as we are not opposed to the objectives of the Fund there appears, on present information, to be no strong reason for declining to seek membership. We have already joined the Food and Agricultural Organisation, are participating in the Commonwealth discussions connected with the formation of the International Trade Organisation and are represented at the Paris conferences arising out of the Marshall Plan. Our readiness to collaborate with other countries in the field of international finance was implied in the provisions of the Central Bank Act, 1942, which empowered the Central Bank to join the Bank for International Settlements.
12. As regards the International Bank for Reconstruction and Development, membership would involve a liability of the same order as the subscription for membership of the Fund but it is doubtful whether this country, in view of its present creditor position, would qualify for loans or financial assistance from the Bank. Membership of the Bank does not appear to be a necessary condition of membership of the Fund but all members of the Fund have joined both organisations. The question of joining the Bank would become important, however, if it were proposed to use the Bank as a channel for the distribution of any United States assistance to Europe under the 'Marshall Plan'. The Minister recommends that inquiries should be made as to the amount of the quota which would be assigned to us if we became members of the International Monetary Fund and the Bank for International Reconstruction and Development.