Drawing from International Monetary Fund,
I have carefully Considered your telegrams 960 [1] and 961 [2]
Outlining your discussions with Martin and Southard.

Whilst I am anxious to obtain the drawing as soon as possible, I
do not feel that I can accept Southard's suggestion that we offer
an intention to consult the Fund regarding repayment after 'a
reasonable period, say 3 or 4 years'. My reasons are:-

(a) It would involve accepting a commitment or condition going
beyond the Articles of Agreement and, particularly at the present
time, this could be very embarrassing.

(b) Further, the Treasurer of the day could legitimately feel
aggrieved on becoming aware of this additional commitment and
having to deal with it.

(c) Even though the offer might not go beyond indicating an
intention to consult, I feel there would be an implied obligation
to take some action at the end of the 3 or 4 years. Even if this
were not so, Australia would be on the defensive in the
discussions.

(d) In this connection it is significant that Southard added that
the Fund would not press where a substantial repayment would
damage a country.

(e) More generally, it is wrong for the Americans to attempt to
alter the Articles of Agreement by establishment of administrative
precedents, particularly when the precedents limit the rights of
members under the Articles. I would also add that these
limitations are of a kind which give considerable substance to the
criticisms which had to be overcome before Australia joined the
Fund.

I would therefore like you to pursue the matter further with
Southard with a view to obtaining his agreement to a drawing by
Australia without any special conditions. I feel that Australia's
record in fulfilling its international obligations should be
sufficient assurance to the Fund, particularly as it is a first
drawing which we desire.

At the same time you may inform Southard that we appreciate the
significance of the problem that is worrying him. We recognise
that the Articles of Agreement were framed on the assumption of
convertibility of sterling and other major currencies after a
reasonable transition period. It may well be that Southard's
expectation of a lengthy period of inconvertibility requires some
re-examination of the Articles. The proper way to do this,
however, is for the matter to be raised with member Governments,
perhaps at the Annual Meeting of Governors, and arrangements made
for an investigation and the submission of recommendations.

Australia would be prepared to support any such investigations.

I have not communicated with the Chancellor informing him of
Southard's suggestion and my response, but I see no objection to
your keeping Bolton and Tansley [3] informed. [4]