between the monetary areas of the Contracting Parties, authorised by the competent authorities in accordance with their respective currency transfer policies, and thus to assist the Contracting Parties to implement the decisions of the Organisation on commercial policy and the liberalisation of trade and of invisible transactions, and to attain the objectives and satisfy the conditions set out in the Preamble to the present Agreement.

Article 3

OPERATIONS

For the realisation of the purposes of the Union, operations (hereinafter referred to as the "operations") shall be carried out periodically whereby the bilateral surpluses and deficits of each Contracting Party shall be offset and the residual net surplus or deficit towards all other Contracting Parties taken together shall be settled with the Union in accordance with the provisions of the present Agreement.

Article 4

BILATERAL SURPLUSES AND DEFICITS

(a) A bilateral surplus or deficit shall be the surplus or deficit of one Contracting Party in relation to any other Contracting Party for any period in respect of which operations are carried out (hereinafter referred to as an "accounting period").

(b) Where the central bank of one Contracting Party keeps in the name of the central bank of another Contracting Party accounts reflecting the transactions referred to in Article 2, the bilateral surplus or deficit of those Contracting Parties shall be calculated on the basis of the difference, as between the beginning and the end of each accounting period, of the balances of those accounts.

(c) Where the central banks of two Contracting Parties do not keep with each other accounts reflecting the transactions referred to in Article 2, those Contracting Parties shall, unless the Organisation decides otherwise, take the measures necessary to enable their bilateral surpluses or deficits to be calculated.

(d) Repayment instalments in respect of consolidated debts or of outstanding debts amortised or repaid in accordance with the provi sions of Annex A to the present Agreement shall be included in the calculation of bilateral surpluses or deficits.

(e) Amounts representing the proceeds of capital transactions, other than those referred to in Article 12 and Annex A to the present Agreement, shall, if the two Contracting Parties concerned so request, be excluded from the calculation of bilateral surpluses or deficits. Unless the Organisation decides otherwise, such amounts may no longer be excluded when they have been used in the monetary area of any of the Contracting Parties. If these amounts are excluded

e

because they have been used outside the monetary areas of the Contracting Parties, any moneys paid in respect of interest on or amortisation of such amounts shall be excluded in subsequent operations, at the request of the Contracting Parties concerned made at the time of the exclusion of such amounts.

(f) Each Contracting Party shall use its best endeavours to ensure that abnormal balances in the currencies of other Contracting Parties are not held by banks other than central banks or otherwise placed so that they are excluded from the calculation of bilateral surpluses or deficits.

(g) For the purposes of the present Agreement, the central bank of a Contracting Party shall mean the central bank or other monetary authority designated by that Contracting Party.

Article 5

NET SURPLUSES AND DEFICITS

The net surplus or deficit of a Contracting Party shall be an amount equal to the difference between the sum of its bilateral surpluses and the sum of its bilateral deficits for an accounting period.

Article 6

ACCOUNTING SURPLUSES AND DEFICITS

The accounting surplus or deficit of a Contracting Party shall be the net surplus or deficit of that Contracting Party for an accounting period, adjusted:

(i) by any amount in respect of an initial balance allotted to that Contracting Party and used or reconstituted in accordance with Article 10 in the operations relating to that accounting period; and (ii) by any amount in respect of existing resources held by or in relation to that Contracting Party and used in accordance with Article 9 in the operations relating to that accounting period. The adjustment shall be made as if the amount used were a bilateral surplus of the Contracting Party which held the said existing resources and a bilateral deficit of the Contracting Party in relation to which they were held.

Article 7

CUMULATIVE ACCOUNTING SURPLUSES AND DEFICITS

The cumulative accounting surplus or deficit of a Contracting Party with the Union shall be an amount equal to the difference between the sum of its accounting surpluses and the sum of its accounting deficits.

Article 8

FINANCING BETWEEN OPERATIONS

(a) Each Contracting Party shall make amounts of its currency requested by any other Contracting Party available to that other Contracting Party, without requiring a settlement in gold or in the currency of any third country, to the extent necessary to enable payments in respect of transactions referred to in Article 2 to be made during the periods between the operations.

(b) Under the provisions of the present Article no Contracting Party may be required to place at the disposal of other Contracting Parties amounts of its currency exceeding in aggregate the amount by which its cumulative accounting surplus falls short of its quota as defined in paragraph (a) of Article 11.

PART II

SETTLEMENT OF SURPLUSES AND DEFICITS

Article 9

EXISTING RESOURCES

(a) Existing resources corresponding to outstanding debts, within the meaning of paragraph 1 of Annex A to the present Agreement, held by a Contracting Party, shall be used at its request for the settlement of its net deficit for an accounting period, except to the extent that it had a cumulative accounting surplus at the conclusion of the operations relating to the preceding accounting period. However, to the extent that its net deficit may be settled in accordance with paragraph (e) of Article 10, a Contracting Party to which an initial debit balance is allotted may only use these resources with the approval of the Government of the United States of America given after consultation with the Managing Board referred to in Article 20. (b) When outstanding debts are amortised or repaid in accordance with Annex A to the present Agreement, the resources corresponding (a) of the present Article with the agreement of the Contracting Party owing the debt.

Article 10

INITIAL BALANCES

(a) Initial credit and debit balances for the period from 1st July, 1950, to 30th June, 1951, for the amounts shown in Tables I and II respectively, will be allotted by the Government of the United States of America in respect of the Contracting Parties shown in those

Tables.

(b) Initial credit and debit balances may, in connexion with the European Recovery Programme, be allotted for the period from 1st July, 1951, to 30th June, 1952, by the Government of the United States of America after consultation with the Organisation. Any balances so allotted shall be communicated to the Organisation by 30th June, 1951.

(c) In the operations relating to accounting periods prior to 1st July, 1951, initial credit and debit balances allotted by virtue of paragraph (a) of the present Article shall be used for the settlement of net deficits and surpluses, respectively, of the Contracting Parties to which they are allotted; provided that an initial debit balance shall be used to settle the net surplus of a Contracting Party only to the extent that an equivalent amount of conditional aid is already firmly allotted to it.

(d) Where a Contracting Party receives an initial credit balance partly as a grant and partly as a loan, the portion of the initial credit balance which is allotted as a grant shall be used before that part which is allotted as a loan.

(e) The net surplus in any accounting period prior to 1st July,

LIDIANT

1951, of a Contracting Party to which an initial credit balance is allotted, and the net deficit in any such accounting period of a Contracting Party to which an initial debit balance is allotted, shall be settled up to the amount that the initial balance stands reduced at the beginning of that accounting period, by the reconstitution of the initial balance.

(f) A net surplus or deficit of a Contracting Party shall be settled in accordance with paragraphs (c), (d) and (e) of the present Article only to the extent to which it exceeds any cumulative accounting deficit or surplus, respectively; of the Contracting Party concerned as at the conclusion of the operations relating to the preceding accounting period and, in the case of a net deficit, only to the extent that it has not been settled under Article 9.

(g)—(i) Subject to the provisions of sub-paragraphs (ii) and (iii) of the present paragraph, any amount in respect of an initial credit balance allotted as a grant, or of a debit balance, not used in the operations relating to accounting periods prior to 1st July, 1951, shall be deemed to be a net surplus or deficit, as the case may be, of the Contracting Party to which the initial balance was allotted, arising in the accounting period beginning on 1st July, 1951.

(ii) The preceding sub-paragraph shall apply as regards any amount in respect of an initial debit balance only to the extent that an equivalent amount of conditional aid is already firmly allotted to the Contracting Party concerned.

(iii) Any amount in respect of the initial debit balance allotted to the United Kingdom and not used in the operations referred to in sub-paragraph (i) of the present paragraph shall be cancelled.

(h) Initial credit balances allotted as a loan:

(i) shall bear interest payable to the Union at the same rate as that applied to credits granted to Contracting Parties by the Union by virtue of Articles 11 and 13, from the day on which they are used, and for as long as they are used, to settle net deficits; (ii) shall, in so far as they are not used to settle net deficits, remain available for use by the Contracting Party in whose favour they were allotted, until the liquidation of the Union when they shall be cancelled; and

(iii) shall, in so far as they have been used to settle net deficits, be repaid at the time of liquidation of the Union, in the same manner as credits granted by the Union, in accordance with the provisions of paragraphs 21 and 22 of Annex B to the present Agree

ment.

Article 11

CREDITS AND GOLD PAYMENTS

(a) The accounting surplus or deficit of any Contracting Party shall be settled by the granting of credit and the payment of gold as