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DOCUMENT OF INTERNATIONAL MONETARY FUND AND NOT FOR PUBLIC USEf

Jrr.George ~ l e t o P o U l O SRoom

EB/ CM/Ta.nganyika/62/2Correction 1

June 19, 1962

To: Members of the Committee on Membership - TanganyikaFrom: The SecretarySubject: Tanganyika - Quota Calculation - Revised Recommendation

The following c o r r e c ~ ~ o n has been made in the paper prepared bythe s taff on the revised recommendation of the Quota calculation forTanganyika (EB/GM/Tanganyika/62/2).. The corrected page is attached .Page 2, para . 2, f i r s t sentence: for the f i rs t sentence of theparagraph substitute the following: "The staff is nOvl informedthat the East African Currency Board, in distributing i t s profi tsrelat ing to 1959/60, has increased the proportion allocated toAden from about 7 per cent, which was the average figure duringthe previous three years, to about 12 per cent, suggesting achanged estimate of the currency circulation in Aden. The col-lective share of Aden-and ZanZibar has increased from an averageof about 11 per cent in the preceding three years to about 15per cent.tI

Att=(l)

Other Distribution:Members of th e Exec utive BoardDepartment HeadsDivision ,Cbiefs

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DOCUMENT OF INTERNATIONAL MONETARY FUND AND NOT FOR PUBLIC USE

INTERNATIONAL MONETARY FUNDCalculation of Quota for TanganyilcuRevised R e c o r r ~ e n d a t i o n

Prepared by the African Department(In Consul a t on vlith the Legal Department and theOffice of the Treasurer)Approved by Moeen A. Qureshi

June 14, 1962The attached communication has been received from the ExecutiveDirector for the United Kingdom who has been authorized by the Governmentof Tanganyika to negotiate the terms and conditions of Tanganyika's member-

ship in the FU.11d (Attacbment 1). In the l ight of the nevI informationprovided in the cOJ:Bnunication, vThich "HaS not available to the s taff a t thetime the quota paper on Tanganyika (EB/CI\1/Tanganyika/62/l) was prepared,the calculation of Tanganyilca' s gold subscription payment 1:.:.f"..s been revised.The procedure adopted for calculating Tanganyika s gold subscriptionpayment in the It"'und 'vas based on the fact that Tanganyil\.a has no inderendent currency and reserves; the reserves that support the currency incirculat ion in Tanganyika are held by the East African Currency Board, the

common currency issuing authority for Tanganyika, Kenya, Uganda, Aden andZanzibar. I f the assets of the East African Currency Board were distr ibutedamong i ts constituent members, i t is a s s ~ u n e d that this would be on the "basisof the proportion of Board currency circulating in each constituent member'ste r r i tory . Since the Board's currency circulates freely between i ts variousconsti tuent terr i tor ies , there are no separate recorded figures of the currency circulation for each terr i tory

In the ear l ier quota paper (EB/C!11/Tanganyilca/62/l) the s taff estimated,on the basis of the then available data, that approximately 30 per cent ofthe Board currency circulated in Tanganyika. Assuming a proportionatedistribution of the various types of assets of the East African CurrencyBoard, this suggested that Tanganyika s share in the Board's to ta l cash andshort-term convertible currencies would also amount to about 30 per cent,or an amount of $24,202,005. Ten per cent of this amOll.11t ($2,420,000) wasthe figure suggested in the recommendation regarding gold subscriptionpayment.The s taf f estimate that the currency circulat ion in Tanganyika was inthe order of a p : p r o x i ! l ~ a t e l y 30 per cent of to ta l Board currency was reachedas follO"Hs: The f i r s t step in the calculation was to estimate the currencyin ctrculation in the three terr i tor ies of Tanganyika, Kenya, and Uganda byseparating the circulation in Aden and Zanzibar, and the seccnd step '''as toarrive a t an estimate for Tanganyil:a, There is very l i t t l e economic information on f t ~ e n and Zanzibar and the s taff based i t s estirrate of the currency

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2 EB/CM/Tangaoyika/62/2Corrected: 6.19.62

circulation in the t"70 terr i tor ies on the proportion of East Africa..'!').Currency Board profi ts distributed to them in past years. The share ofthese terr i tor ies has been about 11 per cent in to ta l Board profi ts relat ing to the years 1956/51, 1951/58, and 1958/59. This appeared to bea reasonable basis for estimating their currency circulation becsuse,according to information'Bupplied to the s taf f by Tanganyikan authorit ies ,the share of Board profi ts allocated to Aden (which accounts for a majorproportion of the currency circulation in Aden and Zanzibar) is based onthe estimated rat io of the currency circulation in Aden to to ta l Boardcurrency. In the l ight of these facts, i t was assumed that about 11 percent of to ta l Board currency circulated in Aden and Zanzibar a..'l1d the balanceof 89 per cent circulated in the three ter r i tor ies of Tanganyil{a, Kenya,and Uganda.

There is considerable economic information on the three ter r i tor ies ofTanganyika, Kenya, and Uganda, and on the basis of the comparative figuresof national income, trade, population" and other relevant guides, the s taff calculated that the currency circulation in Tanganyi1\.a "7as approximatelyone-third of the tq ta l currency circulating in the three terri tories. Onthis basis , the share of Tanganyika amounted to about 30 per cent (one-thirdof 89 per cent) of to ta l Board currency.

The s taff is now informed that the East African Currency Board, in distributing i ts profi ts relating to 1959/60, has increased the proportionallocated to Aden from about 7 per cent, which "las the average figure duringthe previous t ~ e e years, to about 12 per cent, sUggesting a ~ c h a n g e destimate of the currency circulation in Aden. The collective shart; ofAden.and-.Zanzibarihss increased from an average of about 11 per cent in the precedingthree years to about 15 per cent. I f i t is assumed that the currency circulat ing in Aden and Zanzibar amounts to about 15 per cent rather than 11 percent as the s taf f had assumed ear l ier , then the currency circulation in thethree terr i tor ies of Tanganyil{a, Kenya, and Uganda would amount to about 85per cent of to ta l Board currency, and the currency circulation in Tanganyika, one-third of this amount, would amount to approximately 28 per oent of to ta lBoard currency instead of 30 per cent as suggested ear l ier . This wouldreduce the calculated .. ~ a r e of Ta.11ganyil(a in the Board 1 s cash and short-termconvertible currency assets from 30 per cent to 28 per cent. The revisedcalculation on the basis of the la tes t available data relat ing to April 30,1962 is shown below: PreviousCalculation(As of September 30, 1961)

Ne"lCalculation(As of April 30, 1962)(U.s. dollars equivalent)a. Convertible currencyholdings of East AfricanCurrency Board 80,613,351

b. Estimated share ofTanganyikac. 10 per cent of (b )

24,202,0052,420,200

80,150,01622,442,021

2,244,200