ness to give assistance to developing countries. But economic aid still constituted
only a small fraction of the total foreign receipts of developing countries, and failed
to compensate for the deterioration in their terms of trade. The first objective was
therefore seen to be a reversal of the adverse trend of export earnings aided where
necessary by policies of structural adjustment in both exporting and importing
countries. Developing countries also urgently required assistance in replenishing
their liquid reserves and for moderating the impact of fluctuations in the export
earnings.
committee of UN experts (UN, 1961c).
member countries would pay contributions and against which members would
make financial claims which would be paid automatically in stated circumstances.
Such claims would be based on the decline of export proceeds in a particular year
as against the average for the three preceding years, and would cover a proportion
of the shortfall thus defined in excess of a minimum shortfall of five per cent
for which no compensation was payable. The proposal was not implemented.
However, in the 1960s, the IMF established two facilities designed to address the
payments problems associated with export instability, particularly for countries
highly dependent on primary commodities. A Compensatory Financing Facility
(CFF), established in 1963, was designed to alleviate the balance of payments
effects of export instability by providing assistance to countries experiencing
temporary shortfalls in their exports due to factors largely outside their control.
A Buffer Stock Financing Facility (BSFF), established in 1969, enabled the IMF to
provide financial support to members involved in efforts to stabilize commodity
prices through buffer stock operations under formal international commodity
agreements in which the interests of both importing and exporting members were
represented (Kaibni, 1988).
atory finance was complementary to commodity agreements, not an alternative
to them. But what should such agreements serve? Commodity agreements could
not be successful in stabilizing prices and in securing reasonable terms of trade
unless they also succeeded in bringing world production and consumption of the
commodity concerned into line. This was not a matter of international agree-
ments alone. It required close co-ordination between international arrangements
and national policies.
to the requirements of world demand over a longer period' (Blau, 1963). From
this point of view, quota arrangements or multilateral contracts offered some
of the elements required, for a limited range of commodities, provided they
included provision for the co-ordination of the national policies of all the countries